Attorneys’ fees clause
An attorneys’ fees clause decides who pays legal fees in a dispute, often requiring the losing party to pay the winner’s reasonable fees.
What it means
In the US, each side in a lawsuit usually pays its own lawyers, win or lose. An attorneys’ fees clause changes that by contract. The most common version is a prevailing party clause: whoever wins recovers its reasonable attorneys’ fees and costs from the loser.
This can decide whether a small claim is worth pursuing. A freelancer owed $6,000 might spend more than that on lawyers to collect it. With a prevailing party clause, the freelancer can recover those fees on winning, and the client has more reason to pay before it gets that far.
The same clause cuts both ways. If you sue and lose, you may have to pay the other side’s legal bill, which can be far larger than yours. Some clauses let only one party recover fees, and some states, including California, treat a one-sided fee clause as working in both directions.
Deciding who “prevailed” can itself become a fight when each side wins on some points. Clear definitions help.
What to watch for
- Check whether the clause is mutual or lets only one party recover fees.
- Look at how the prevailing party is defined, especially when each side wins some claims.
- See whether it covers only lawsuits or also arbitration, appeals, and collection of a judgment.
- Check whether recoverable fees are capped or limited to “reasonable” amounts.
- Consider how the clause changes your risk if you ever need to bring a claim you might not win.
Example clause
In any action or proceeding to enforce or interpret this Agreement, the prevailing party shall be entitled to recover its reasonable attorneys’ fees, costs, and expenses from the non-prevailing party, including fees incurred on appeal and in collecting any judgment.
Whoever wins a dispute gets the loser to pay their legal bills, so losing costs more than it otherwise would.