The Dirt Report - September 2011


Samuel Goldwyn famously commented that "an oral contract isn't worth the paper it's written on." It turns out that, in some cases, the same can be said for attorneys' fee provisions in written contracts. Understanding why that is the case can help in drafting a more valuable fee provision.

Take the case of Seller, who spent months negotiating a written contract with Buyer. The agreement included an attorneys' fee clause stating that, "in any dispute between the parties arising out of this agreement, the prevailing party shall be awarded its attorneys' fees and costs incurred in connection with the dispute." Seller insisted on that clause to discourage meritless lawsuits and protect her if she had to defend against one.

Buyer later sued Seller for breach of contract, fraud and other torts relating to the transaction. In defending against what she believed to be baseless claims, Seller took comfort in knowing that she would be entitled to recover her attorneys' fees and costs if she prevailed.

Two years later, and just days before trial was to begin, Buyer voluntarily dismissed all claims. Seller had a complete resolution of the claims against her without any liability to Buyer.

So, Seller was entitled under the contract to recover her attorneys' fees, right?

Well, maybe. And, if so, only in part. Why?

Please see full article below for more information.

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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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