ATTORNEY’S FEES PROVISIONS IN CONTRACTS
If you are reviewing or drafting a contract, one thing to consider is attorney’s fees. The general rule is that each side pays its own fees. For (oral or written) contract cases, a party may be able to recover its reasonable and necessary attorney’s fees. Texas has a statute which governs so long as a party prevails on the claims for breach and recovers damages (money). If the parties negotiate a written contract, they should take care to consider how attorney’s fees should be handled if there is a lawsuit if the deal goes south.
THE PARTIES CAN DECIDE THE REQUIREMENTS FOR RECOVERY OF ATTORNEY’S FEES
The parties to a contract can provide for either stricter or looser requirements for the recovery of fees. For example, maybe you don’t recover any money however you establish the other party breached the contract. You would not be entitled to recovery under the Texas Statute for attorney’s fees, but could be able to recover under the provision in your contract.
MAKE SURE THE CONTRACT DEFINES “PREVAILING PARTY”
If you are reviewing or drafting a contract, make sure you take a little bit of time to define what a “prevailing party” is in a future lawsuit, otherwise you will be arguing the issue to the court.
Think about it, all you have to do is ask your lawyer to throw in one provision and it costs less than an hour of fees now but could save you thousands later. Generally, a party must gain something in order to get attorneys fees, be it monetary relief, a declaratory judgment, a consent decree, or an order.
It could be that you establish a breach but the jury gives you ‘0’ dollars, however if you craft your attorney fee provision properly you could be considered prevailing and recover your fees.
YOU CAN ALSO LEAVE OUT AN ATTORNEY FEE CLAUSE, WHEN ADVANTAGEOUS TO YOU OR YOUR BUSINESS AND THE CONTEXT OF THE CONTRACT
It may also at times be advantageous to a party (and disadvantageous to the other party) to include or remove an attorney’s fee provision. These are matters of strategy based on the preferences of the parties.
If you are reviewing or drafting a contract and want to discuss the meanings of the clauses or make sure that you fully understand what you are signing and what your contract includes and leaves out, send me an email on the contact page and I will be happy to speak with you about how my contract review and drafting practice works. It is important if you are going to sign a contract or are the drafting party, that you maximize every advantage and ensure that if things do not go as planned, you are in the best position. Make sure you consult with a Texas attorney, call Texas business attorney Tim Sutherland to discuss any questions you may have.