General Assembly Validates Reciprocal Attorney Fee Reimbursement Agreements in Commercial Contracts


Under current law attorney fee reimbursement provisions in contracts are not enforceable in North Carolina, unless there is a statute that authorizes an award of attorney fees in the particular type of lawsuit or transaction at issue. For an ordinary breach of a run-of-the-mill commercial contract, the prevailing party almost never recovers their attorney fees from the other party in court, even if the contract expressly calls for it. There is an existing statute that validates attorney fee reimbursement provisions in promissory notes and other debt instruments (subject to certain limitations) but not for ordinary non-debt contracts.

However, on June 27, 2011, Governor Perdue signed into law Senate Bill 414, which makes many attorney fee reimbursement provisions in non-debt contracts enforceable in North Carolina. Senate Bill 414 establishes a new section of the North Carolina General Statutes, N.C.G.S. § 6-21.6, which declares reciprocal attorney fee provisions in commercial contracts “valid and enforceable,” subject to the provisions of the statute.

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