Attorney's Fees Clauses: What They Mean for You
What Is an Attorney's Fees Clause?
An attorney's fees clause is a contract provision that determines who pays legal costs if a dispute arises. Under the default American Rule, each party bears their own legal fees. An attorney's fees clause overrides this by shifting some or all legal costs to one party under specified conditions.
Common Variations
These clauses come in several forms:
- Mutual (bilateral) — either party can recover fees if they prevail in a dispute
- One-sided (unilateral) — only one party (often the drafter) can recover fees
- Mandatory vs. discretionary — some clauses guarantee fee recovery while others leave it to the court's discretion
- Broad vs. narrow scope — some cover all disputes "arising from or related to" the contract, while others are limited to specific types of claims
What to Look For
Before signing, consider these factors:
- Reciprocity — is the clause mutual or does it favor only one side?
- Scope — does it cover arbitration, mediation, and appeals in addition to litigation?
- Cap — is there a limit on recoverable fees, or is it open-ended?
- Trigger — does fee-shifting require a court judgment, or does it apply to any "dispute"?
Practical Impact
An attorney's fees clause can dramatically change the risk calculus of a dispute. In a $50,000 contract dispute, legal fees can easily exceed the amount at stake. Knowing who bears that risk matters.
When to Consult a Lawyer
Consider seeking legal advice if you encounter a one-sided attorney's fees clause in a significant contract, or if you are already in a dispute and need to understand your fee exposure.
This article is for informational purposes only and does not constitute legal advice. Consult a licensed attorney for guidance specific to your situation.