What Is an Attorney’s Fee Provision?
An attorney’s fee provision — sometimes called a fee-shifting clause or prevailing party clause — is a contractual term that addresses who is responsible for paying attorneys’ fees in the event of a dispute. These provisions are common in business contracts and can significantly affect the economics of litigation or dispute resolution.
The American Rule vs. Contractual Fee Shifting
In the United States, the general rule is that each party pays its own attorneys’ fees, regardless of who wins or loses a dispute. This is known as the “American Rule.” Courts generally follow this default unless a statute or a contract provides otherwise.
An attorney’s fee provision in a contract is one of the primary ways parties can depart from the American Rule. When a contract includes such a provision, the court may be required to award attorneys’ fees to one or both parties depending on the outcome — though the specific effect depends heavily on how the provision is worded.
How These Provisions Are Structured
Attorney’s fee provisions vary widely. Common variations include:
- One-way provisions — only one party (often the drafting party) is entitled to recover fees if it prevails
- Two-way/mutual provisions — either party may recover fees if it is the prevailing party
- Mandatory provisions — fees must be awarded to the prevailing party
- Discretionary provisions — a court or arbitrator may award fees but is not required to do so
The scope of what is covered can also vary — some provisions cover only attorneys’ fees, while others extend to costs, expert witness fees, and other expenses.
New York and New Jersey Approaches
Both New York and New Jersey generally recognize contractual attorney’s fee provisions, subject to certain limitations. Courts in both states have interpreted these provisions in different ways depending on the specific language used, the type of dispute, and other factors. The outcome in any particular case depends on the facts and governing law.
Frequently Asked Questions
Do I have to pay for my own attorneys’ fees, or does the other side pay?
Under the American Rule — which applies in most U.S. courts — each party typically pays its own attorneys’ fees. This is the default in the absence of a statute or contractual provision that says otherwise.
What if my contract has an attorney’s fee provision?
If your contract includes a fee-shifting clause and you prevail in the dispute, you may be entitled to recover your attorneys’ fees from the other side. However, the exact outcome depends on how the provision is worded, how the court interprets it, and whether you are considered the “prevailing party” — which itself can be a contested question in some disputes.
What if I lose — do I have to pay the other side’s fees?
Potentially, yes, if the contract has a mutual fee-shifting provision and the other side prevails. This is an important reason to understand whether your contract contains such a provision before a dispute arises.
Does a one-sided fee provision only protect the other party?
In New York, courts have in some cases applied a doctrine of mutuality to one-sided fee provisions, treating them as mutual even when the contract’s literal language favors only one side. This is a nuanced legal issue and the outcome depends on the specific facts and applicable law.
Are there statutory fee-shifting provisions?
Yes — separate from contract provisions, certain statutes in New York and New Jersey allow prevailing parties to recover attorneys’ fees in specific types of cases. Whether a statute applies in your dispute is a separate analysis from whether your contract has a fee provision.
The information on this page is general in nature and does not constitute legal advice. Every situation involves unique facts, and no specific strategy or recommendation can be made without a full review of your circumstances. Contact Russo Law LLC for a consultation.