Thursday, August 8, 2013

Attorney’s Fees – The Oft Neglected but Crucial Provision

On the issue of attorney’s fees, Virginia and many other states subscribe to what is known as the “American Rule.”  The “rule” states that all parties to a lawsuit will be responsible for their own attorney’s fees regardless of who “wins” unless a contractual provision or statute provides otherwise.  Even so, it is often surprising how many contracts fail to include any terms regarding the ability to recover reasonable attorney’s fees in the event that a party needs to sue for breach of the contract.  When negotiating terms, parties routinely fail to consider the costs associated with initiating or defending a lawsuit arising from the contract.  These costs, including but not limited to attorney’s fees, are significant.  In some cases, these costs can even exceed the actual damages incurred as a result of the breach.  In that instance, the wronged party can never be “made whole” because he or she has had to absorb the costs of the lawsuit.  This result can easily be avoided if the contract provides for the ability of a prevailing party in a suit for breach to collect attorney’s fees. 

Attorney’s fees provisions can also benefit the parties by discouraging litigation in some circumstances, or reducing the time before settlement of litigation in others.  The provision should deter a party from filing any lawsuit that is not a) necessary and b) well-founded, due to the risk that he or she will be ordered to cover the opposing party’s fees if the suit is not successful.  The same risk encourages parties to enter into negotiations and reach a resolution before incurring substantial fees.  Although an attorney’s fee provision is a necessary and far reaching provision, it terms are relatively straight forward and simple.  When entering into negotiations regarding the language and terms of a contract, or before drafting even the simplest agreement of your own, it is always in your best interest to consult an attorney to ensure that the ability to recover reasonable attorney’s fees is provided clearly and in accordance with the law of the jurisdiction that will be used to interpret the contract in the case of an alleged breach.  While many people believe that they only need an attorney once a problem arises, it is only by consulting an attorney prior to the execution of the contract that you can ensure you are protected before it’s too late.  RRBMDK attorneys are experienced in drafting and reviewing contracts/agreements arising in various areas of law – from Real Estate to Family Law, Employment to Corporate Organization, and want to urge anyone considering entering into a written contract to call upon us for a thorough document review, and to answer any questions related to that ever-present “fine print.”