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How Attorneys’ Fee Provisions in Contracts Can Affect Litigation

It’s customary in the United States that each party engaged in litigation pays for their own lawyer. However, the “’American rule,” as it is called, has exceptions. One of them is where a contract provides for legal fees to be recoverable by one party from another in designated circumstances, such as when one party prevails in the case. Attorneys’ fee clauses can play a significant role in litigation or can even be an important factor in why a lawsuit is or is not filed.

Attorneys’ fee provisions can affect the parties’ strategies during litigation, since the fee recovery can add significantly to the eventual award or settlement. Such a clause will especially have an impact on a shallow-pocketed defendant, who will likely be agreeable to a settlement rather than risk the prospect of a finding of liability and having to pay damages and attorneys’ fees.

On the other hand, the existence of an attorneys’ fee clause can be incentive for a person of modest means to sue over alleged contractual violations. A plaintiff who has confidence of winning a case at trial may be willing to incur the costs of litigation because an ultimate victory means an award of attorneys’ fees.

Without an attorneys’ fee clause, plaintiffs who believe they have strong claims for breach of contract but who have sustained only relatively small amounts of damages may be hesitant to sue, since the attorneys’ fees required for prosecuting a lawsuit may be greater than the amount of damages recoverable. If there is an attorneys’ fee clause, a plaintiff who believes another party has breached the contract but fears that proving breach will be difficult may be reluctant to sue since, if they lose the case, they will have to pay the other side’s attorneys’ fee.

H. Clay Parker, Esq. advises Central Florida clients on a full range of contract matters, including negotiations and disputes involving attorneys’ fee clauses. Please call 407-216-2504 or contact us online to schedule an appointment at our Orlando office. In cases related to civil or business litigation, we offer a $50 initial consultation.

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