Attorney’s fees clause in contract
The prevailing party attorney’s fees clause in a contract is one of the most important clauses of the contract. The wrong words could mean the difference between getting most of your fees back, or getting some of your fees back, or getting none of your fees back.
Fees for Fees
First, there is the question of whether the prevailing party will be able to make a claim for fees for fees. Generally, prevailing party fees refer to the attorney’s fees incurred through the date of the judgment. The judgment usually signals the end of the fees.
A second litigation for fees
However, the fees incurred in collecting the fees can be equally costly. An award of prevailing party attorney’s fees triggers a second litigation. The parties will engage in discovery. Discovery will include requests for production, admissions, and interrogatories. Depositions may be taken. Experts will be hired. Hearings will be scheduled and attended. All of this costs the client money.
All of this results in additional costs to the prevailing party. If your attorney’s fees clause of your contract does not have the right words, any fees incurred during the post-judgment phase of the lawsuit will not be recoverable. Thus, you will be out of pocket for all attorney’s fees spent post-judgment. This can be more than the cost of the original law suit.
I have seen situations where the losing party’s attorney engages in what is nothing short of bad faith litigation for the sole purpose of running up the prevailing party post-judgment attorney’s fees. If the losing party is not paying these fees, there is no incentive to act otherwise.
What if the losing party appeals the decision of the lower court? If your attorney’s fees clause in your contract does not have the right words, then you will be out of pocket for the attorney’s fees incurred in the appeal. For this reason alone, it is very important that you consult with an attorney to draft your contracts.
Don’t Be Like Everyone Else
Clients tend to pay attention to the attorney’s fees clause of their contracts after it is too late — after the breach has happened and when the lawsuit is ongoing. The time to address the language in the attorney’s fees clause of your contract is before the contract is signed.
Let us draft the right language for your attorney’s fees clause of your contract. Don’t be like everyone else. Be smart!