Be careful what you ask for (Attorney’s fees in contracts)

Common usage creates some confusion in this area, but lawyer fees are the amount an attorney charges his client, whereas attorney’s fees are costs of litigation potentially shifted between parties. There are no attorney’s fees at common law. Usually you pay for your lawyer, I pay for mine. However—attorney’s fees can be awarded by statute or by contract.

A common attorney’s fee provision reads something like this:

“The prevailing party shall have the right to collect from the other party its reasonable costs and necessary disbursements and attorneys’ fees incurred in enforcing this Agreement.”

Some parties to contracts attempt to create a more one-sided risk regarding attorney’s fees, with clauses such as the following:

“The employer shall have the right to collect from the employee its reasonable costs and necessary attorney’s fees in enforcing this agreement.”

You thought you were so smart when you wrote that clause. Guess what? California has other plans for you. Any provision calling for an award of fees to only one contracting party is deemed to apply to any contracting party who prevails in litigation under the contract. See CA Code Civ. Proc. § 1717. So, anytime one creates a one sided attorney’s fees provision, it is construed bilaterally and is binding on all parties. Considering the uncertainty in litigation its generally best to stay away from attorney’s fee awards altogether. Things have come to a pretty pass, goodness knows what the end will be, so let’s call the whole thing off. (Louis Armstrong anyone?) So, next time you are writing a really creative contract provision and think you’re really smart—remember the California legislature might just be one step ahead of you, and that provision may have unintended consequences.

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