- Posted by Holmes Weinberg, PC
- On June 30, 2017
If you are running a small business, this blog post is for you. You probably have a form, purchase order, or other short contract you always use. When is the last time you reviewed those? Have you had a contract lawyer look them over? Take a moment to look at your forms and contracts. Do they include an attorney fee provision? If not, as a business litigation lawyer Memphis, TN routinely trusts in contract matters, we recommend that you add one.
Reasons to Add an Attorney Fee Provision
If someone doesn’t pay you, you may need to file a lawsuit in court to recover what you are owed. Going to court is expensive. In most states, like in Tennessee, each party is responsible for paying their own attorney fees. This is called the “American Rule.” The rule presumes legitimate disputes and makes sure that neither party fears a financial burden being placed upon them for using our judicial system. This means that even if you win in court, you generally can’t make the other side pay your attorney fees unless you have an attorney fee provision in your contract or unless a specific statute allowing recovery of attorney fees applies. I can’t count the number of times in business litigation that clients ask me whether they can get the other side to pay their attorney fees, and in most cases, the answer disappoints.
In addition to giving you a contractual basis upon which to recover your attorney fees, including an attorney fee provision in your forms and contracts also creates leverage that you may be able to use in resolving a dispute about payment. If the other side reasonably believes they might become liable for your attorney fees if they do not pay, it could encourage them to make payment or reach a settlement with you.
Sample Attorney Fee Provision
If any party institutes any action or proceeding to enforce any provision of this contract by reason of any alleged breach of any provision herein, the prevailing party shall be entitled to receive from the losing party all legal fees and costs incurred in connection with any such proceeding.
If you need help reviewing your business forms and contracts, or need help with incorporating attorney fee provisions and other protections into your forms, contact a trusted attorney
Thanks to our friends and contributors at Wiseman Bray PLLC who have significant experience in contract review and drafting.