When two parties litigate in America, each side typically bears its own attorney fees, whether they win or lose. The prominent exception to this rule is when attorney fees are specifically provided for either in a statute particular to the subject matter of the litigation or a in contract between the parties.
When I review or draft a contract for my clients, I always make sure that an “attorney fee clause” (otherwise known as an “enforcement clause“) is included. Attorney fee clauses provide that if either party to a contract successfully pursues or defends a cause of action for breach of contract, the losing party will pay the winning party’s attorney fees.
Attorney fee clauses are important for two reasons: (1) they deter frivolous or questionable lawsuits; (2) they allow meritorious lawsuits to be economically feasible; and (3) they encourage settlement.
Deterrence of Frivolous Lawsuits: Unfortunately, we have a very litigious society. Individuals and businesses are frequently sued without merit. Having a clause in your contract that makes the other side liable for your attorney fees if they lose is the best deterrent to non-meritorious lawsuits.
Allowing meritorious lawsuits to be economically feasible: The flip-side of the coin is that if you do in fact have a meritorious lawsuit, but you have a small amount of damages, an attorney fee clause can make the lawsuit economically feasible. For example, if your business has a customer who owes you $1,000.00, and you do NOT have an enforcement clause, it will cost you more to pursue the lawsuit than you can possibly collect. You would be well advised to simply write off the money as lost. However, if you are able to collect attorney fees in addition to your $1,000.00 damages, the lawsuit may make economic sense to pursue.
Encouraging Settlement: The longer the suit goes on, the more expensive the attorney fee damages will be for the losing party . . . and there is no cap to these damages. If your opponent has a less than meritorious case, the potential for these damages may scare some sense into him or her. Not only will the person on the losing end of the lawsuit be more likely to settle fairly and quickly, but the lawsuit may not even be necessary. In the previous example of the customer with the $1,000.00 debt, that customer will be more likely to pay without litigation if he or she knows that not only will he or she owe $1,000.00, but also an unknown amount of attorney fees.
Illinois Law Blog: Learn About Law
O’Flaherty Law is based in Downers Grove, Elmhurst, and Naperville, Illinois. Our team has expertise in many areas of law including but not limited to bankruptcy law, business & corporate representation, civil litigation, criminal defense, estate planning, divorce & family law, immigration; probate, guardianship & elder law; and real estate law. If you have any questions or would like to schedule a free consultation, please e-mail us at email@example.com or call us at (630)324-6666.
Where You Can Read Us
O'Flaherty Law has experience in legal services in the following legal practice areas: estate planning and probate; featuring wills and trusts, powers of attorney, living wills, estate tax avoidance and probate practice; real estate law; featuring commercial and residential sales and leases, foreclosure defense, short sales, REO closings and consent foreclosures, mechanic's liens and landlord and tenant disputes; family law; featuring divorces, child custody, child support, paternity, adoption and orders of protection; criminal law; featuring DUI, traffic and criminal defense; business representation; featuring entity selection, incorporation and s-corp election, bylaws and operating agreements, annual reports, annual meetings of shareholders, employment agreements, handbooks and warning and termination letters, business contracts, independent contractor agreements, trademarks and copyrights, regulation and licensing compliance and dissolution and mergers; business and personal bankruptcy; featuring Chapter 7, Chapter 11 and Chapter 13 cases; litigation; featuring commercial contract and tort law, employment and labor law, personal injury and collections; and immigration law.
Located in Downers Grove, Illinois, O'Flaherty Law serves DuPage County, Will County, Cook County, Kendall County, Kane County and McHenry County in Illinois, as well as the following cities: Wheaton, Naperville, Woodridge, Downers Grove, Darien, Willowbrook, Westmont, Lisle, Oak Brook, Warrenville, Glen Ellyn, Aurora, North Aurora, Batavia, Geneva, St. Charles, Lemont, Joliet, Bolingbrook, Plainfield, Crest Hill, Lake Forest, Lake Bluff, Northbrook, Highland Park and Chicago.
© 2015 by O'Flaherty Law. All rights reserved.