Builders and Contractors Exchange
Weekly Bulletin: 11 Sept 2006
Recovering Attorney's Fees in Contracts
By: Stephanie Himel-Nelson
When businesses enter into a contract, no one expects to end up in litigation. Unfortunately, contractual disputes can arise, sometimes years after the contract was signed. Litigation can be expensive. Frequently clients will ask if they will be able to recover their attorney’s fees in the course of litigation. The general rule regarding attorney’s fees in Virginia is that all parties to litigation must bear their own attorney’s fees in a contract dispute. There are, however, a few exceptions to that rule. A party may recover attorney’s fees if a statute permits the recovery, or if the contract expressly awards attorney’s fees.
Statutes permitting recovery of attorney’s fees do not generally apply to the typical contract dispute. Rather, the statutory exceptions are intended to assist one party in litigation to level the playing field. For example, if an employee ends up in a suit with her employer, she may be able to recover her attorney’s fees. The purpose of such statutory exceptions is to prevent a court award from being significantly reduced by attorney’s fees.
The other exception to the general rule occurs where the contract between the parties includes a clause expressly permitting one or both parties to recover their attorney’s fees if successful in the litigation. Such clauses may be bilateral, allowing either party to recover fees if successful, or unilateral, permitting recovery for only a specified party. During contract negotiations, you may want to consider whether such a clause will be beneficial in the event that a dispute arises. If such a clause is already in the contract, be careful to ensure that it is not a unilateral clause benefiting only the other side. Although an attorney’s fee clause can significantly increase the costs of litigation for the losing party, the clause and its associated costs may also assist the parties in quickly settling any disputes. While no one likes to assume that a contract will end up in litigation, some careful contract negotiations at the beginning can prevent excessive costs later.
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This article is meant to bring awareness to this topic and is not intended to be used as legal advice.