Attorneys' Fees Provisions: Not a Blank Check to Overreach


In the American legal system, attorneys’ fees and costs are not recoverable as damages unless expressly authorized by statute. Legal fees are simply a cost of doing business unless the parties to a contract agree otherwise.

Attorneys’ fee provisions come in all shapes and sizes. Some provisions are reciprocal and permit a non-breaching party to recover its fees and costs from the party in breach. Others are one-sided and authorize the recovery of fees by only one of the contracting parties. For example, a commercial lease may permit the landlord — but not the tenant — to recover fees if it prevails in a lease dispute. And a con- tract for the sale of goods may permit the seller to recover fees and costs incurred in a successful collection action.

In the attorneys’ fees provision of a typical commercial contract, the party seeking fees must actually have prevailed in the underlying litigation. This sounds simple. However, what happens when A prevails in litigation against B but A previously rejected a settlement offer from B that was the same (or better) than what A actually recovered?

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