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Attorney’s fee provisions in breach of contract lawsuits

| Feb 13, 2014 | Breach of Contract

Buffington Law Firm’s experienced breach of contract trial lawyers often deal with the issue of attorney’s fee provisions in contracts.  As discussed in one of our recent blog articles, in California and most of the United States in a breach of contract lawsuit the loser normally does not pay the winner’s attorney’s fees as the result of a court judgment.  However, California Civil Code Section 1717 makes an exception to this.  If the contract that is the subject of a lawsuit in fact contains a provision stating that the winner of a lawsuit based upon the contract shall receive its attorney’s fees this clause is enforceable.

The decision as to whether or not to include an attorney’s fee provision in a contract is one of the most important decisions for the parties.  Parties rarely enter into a contract expecting litigation, but this is always a possibility–it happens.   Unfortunately, contract draftsmen sometimes include an attorney’s fee provision reflexively, with little or no thought.  Buffington Law Firm recently litigated a high-dollar breach of contract case in which the subject contract had an outrageous “poison pill” attorney’s fee provision that provided that the winner would receive attorney’s fees, expert fees, travel costs, etc. regardless of the size of the judgment.  It was obvious that the parties, at the time they signed the contract, thought that this (highly unwise) provision was normal “boilerplate legalese.”  Nothing could have been further from the truth.

Whether to include an attorney’s fee provision in a contract is a highly strategic decision.  For example (as in our recent case) it may be known to the parties that if litigation ensues on the contract that one or the other party will likely be insolvent — thus this side has nothing to lose and everything to gain by the presence of the fee provision since if they lose they will not expect to pay it anyway.  Or one side may not be sufficiently wealthy to be able to take the risk of having to pay the other side’s fees — this type of situation can unfairly deter one side from bringing a sound lawsuit simply because the risk is too great.  (There is always a risk of losing a breach of contract lawsuit no matter how good the case seems.)  The worst mistake a party can make is to simply allow a contract drafter to include (or omit) an attorney’s fee provision without thinking through the implications of this decision.

If you have a breach of contract lawsuit involving this topic, we invite you to speak, at no obligation, to one of Buffington Law Firm’s experienced breach of contract attorneys in a free legal consultation.

Questions? Contact Us.

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