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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DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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