Somebody Pay the Lawyers: Fee Agreements in Contract Disputes

Who has the duty to pay the lawyers involved in a contract dispute can come down to existing provisions in the contested agreement. Most of the time, it’s the losing side who ends up with the bill, and they’re almost never happy about it. However, just because a provision requiring payment of attorney fees exists in the contract, doesn’t mean the losing side will be in any hurry to fork over the cash. Your business may have to compel them in court to do so, and a judge will probably have something to say about it as well.

What’s a Provision for Attorneys’ Fees?

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In simple terms, a provision for payment of legal fees is a contract clause enabling the prevailing party in a contract dispute to have costs reimbursed by the losing side. In essence, “I was right, so you should offset my company’s costs in having to prove my correctness.” Costs subject to reimbursement vary widely, and include filing fees, cost of deposition transcription, photocopies, jury payments if at trial, cost of expert witnesses and summons-serving fees. The losing side gets to pay the legal costs of both parties. Is the fair? Yes and no.

The Court Hates One-Way Contracts

Contractual agreements must have an underpinning of fair play, or good faith. Both sides need to gain something from the agreement for it to be legally binding. In creating a contract with a one-way provision for attorney fees, the court may consider the agreement as playing unfairly to one side. For example, if the other party to the contract is bankrupt, the court may rule that there’s no foreseeable means for them to pay your company’s costs. End result? Your business has to pay its own costs, which may seem like an afterthought if your legal team prevails on your behalf.

Equal Bargaining Power is Integral

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All parties to an agreement must be able to bargain on equal footing. This is why unions in labor law function so effectively. They use the power of the united workforce to place employees, who might otherwise be disadvantages, on a level plane with the employer. The same is true with your business and the parties you enter into contracts with on the company’s authority. If the agreement appears too skewed to one side, including the payment of attorney fees and other costs in disputes, the court may lean a closer eye to the contract as a whole. Under such scrutiny, the entire agreement could be voided, leaving your company with nothing to enforce and money out the door.

Creating a fair and effective business contract takes legal skill and years of experience. At our law firm, our attorneys have engaged in business debt collection, contract development and commercial litigation for decades with successes at all levels. If you’re in the middle of a dispute, believe your company has lost money due to a breach of contract, or simply have questions, give us a call today. Let’s work together to put your business on the right path.