When drafting a contract for a new business deal, most business owners don’t want to think about whether the deal might ultimately go south, and what they would do if that happened. But the reality is that a good contract must account for all possible scenarios and contingencies, including the possibility that one party may need to sue the other for a deal gone bad.
When thinking through what contractual provisions might be crucial to protecting a party to the contract in the event of a future lawsuit, the question of attorneys’ fees often arises. Whether to include an attorneys’ fees provision in your contract is a difficult question, but one any party to a contract should consider.
How Does An Attorneys’ Fees Provision Work in Rancho Cucamonga?
An attorneys’ fees provision in a contract is the language which states who should pay attorneys’ fees in the event of a dispute under the contract. Attorneys’ fees language may state that each party shall bear their own fees and costs, but more often the language that is included is “prevailing party” language.
A prevailing party clause states that whoever prevails in a dispute under the contract has the right to seek attorneys’ fees and costs from the other party. This means that a losing party in a dispute can face a substantial penalty as they may owe the prevailing party both damages and attorneys’ fees for the costs incurred in litigating.
Prevailing parties clauses cut both ways. They can be extremely valuable to a party that has been injured under a contract and make it easier to pursue the lawsuit because there is the prospect of recovering fees at the end. On the flip side, they make litigation substantially riskier because there is always the possibility of not only losing but having to pay fees.
In total, prevailing parties clauses require parties to a contract to think long and hard before bringing a civil lawsuit and may encourage the parties to try to negotiate and resolve disputes before heading down the road to litigation.
Courts And Attorneys’ Fees Provisions
Just because parties contract to allow for a prevailing party to win their attorneys’ fees and costs does not automatically mean that the court will award such fees. Courts are always entitled to review contracts for fairness and decide whether they think the terms included in the contract were fairly entered into and should be enforced.
If a judge feels that a prevailing party clause is unfair, perhaps because the parties had unequal bargaining power when signing a contract, he or she may decline to award fees. But if the judge finds the clause was fairly entered into, he or she will usually enforce it.
California Attorneys Assisting You In Evaluating Contract Options
Whether a prevailing party clause makes sense for your contract depends on the positions of the parties, the subject matter of the contract, and the likelihood of legal issues down the road. All of these factors must be carefully evaluated and considered when determining what terms to include in a contract.
At CKB Vienna, LLP, our transactional attorneys have assisted countless clients in contract drafting and can help you determine whether a prevailing party clause makes sense in your case. To talk with our attorneys, or set up an initial consultation, contact us online or at 909-980-1040.