Attorney’s Fees Provisions and Reciprocity
Certain contract provisions are essential to every contract, such as attorney’s fees and interest terms. Unfortunately, in this down-turned economy, breach of contract actions are on the rise and the terms of the contract generally govern the parties’ agreement. A party generally will not be allowed to recover attorney’s fees unless their contract so states, or the dispute is over what is called an “open book account.”
An attorney’s fee provision is to protect one side only, however, it is not as simple as saying “if we spend attorney’s fees as a result of a breach of this contract, we will be allowed to recover them along with the principal and interest.” Specific language in the contract is needed, depending on the situation and in anticipation of any enforcement complications. Likewise, Civil Code Section 1717 states that attorney’s fees are awardable to the prevailing party, making the provision reciprocal, meaning that such provisions can be used to cut both ways and for the benefit of either side, even if drafted in a one-sided manner.
The reciprocal fee right, however, is generally limited to actions “on a contract,” i.e., to enforce the contract, not tort claims. Also, reciprocity is not required in an agreement for recovery of attorney’s fees as an element of an indemnified loss, e.g., a hold harmless agreement indemnifying a party against liability and losses resulting from third party claims (these are most useful in construction contracts). If you have any questions about your rights to recover attorney’s fees in your disputes, or better, if you plan to enter into a contract and have any questions about securing your rights to attorney’s fees in the best manner before you enter into that contract, contact us for a consultation.
