Boilerplate: Attorney Fee Provisions
As we often mention, sometimes the costs of going to court outway the benefits of the desired outcome. This is especially true as attorney fees are rarely recoverable unless required by a contractual agreement or by special statute. An oral agreement does not enforce the recovery of lawyer fees, which is one of the many failures of oral contracts. Thus, it is important to include an attorney fee provision in a contract.
Unilateral Attorney Fee Clauses
Unilateral attorney fee provisions are only permitted in some states. This provision states that if a company needs to sue another company and wins, the second company must pay its legal fees. Under California’s Civil Code section 1717, unilateral attorney fee provisions are automatically construed as reciprocal. Unilateral attorney fee clauses are not permitted in California, but they are permitted in other states. In a previous blog, we explained choice of law, jurisdiction, and venue. The example above shows why choice of law clauses are important.
When to exclude
There are times when having an attorney fee provision in your contract isn’t a good idea. The most typical circumstance is when you are the party with more resources and are concerned about being the subject of spiteful litigation. If you know you can outspend the opposing side in legal fees and you anticipate a lawsuit will be filed later, you might want to leave out an attorney fee provision to deter potential lawsuits. You should, however, include an attorney fee provision if you are concerned that you will not have the resources required to enforce a contract. If lawsuits are part of your firm’s cost of doing business and your company is a frequent target of litigation, you might choose to omit the attorney fee provision from the contract.
What it covers
Despite the fact that attorney fee provisions are considered standard, it is best not to assume it exists. Consult an attorney to guarantee that your contract’s provision covers all potential eventualities. What happens if the parties have a dispute that arises in tort or is unrelated to the contract when a clause indicates that it covers attorney fees for a party “prevailing at trial” for activities “arising from the contract?” What if, instead of going to trial, the parties arbitrate the claim? In certain cases, the phrase may not be comprehensive enough to provide legal fees. These scenarios are why it is always beneficial to consult with an experienced attorney.