Make Sure You Can Recover Attorney’s Fees

Everyone is excited and optimistic when they win a big project award. The last thing you may be thinking about is what happens if this company breaches the contract, or the deal falls through? Too many times, optimism outweighs pragmatism and these questions aren’t considered until it is too late to protect yourself.

Deals do not always fall though, and contracts are not always breached. But disputes do happen. When they do, one of the first questions our clients ask is “will they have to pay for my attorney?” The short answer is it depends. For most types of claims, and in most states, there must be an attorneys’ fee provision in either the contract or a claim specific statute, in order to recover attorney’s fees.  Colorado follows the majority of states in this regard.     

So how can you be sure attorneys’ fees are included? Before you enter a contract, you MUST make sure that a provision for attorneys’ fees is included. These provisions come in many forms. One common attorneys’ fees provision is known as a fee-shifting provision. For example, “In the event of any legal dispute brough by either party to enforce the contract, the prevailing party is entitled to recover all costs and attorney fees addition to any other relief available.” Provisions like this make the opportunity to recover fees mutually available to the party that wins the dispute. Under these provisions the award of attorneys’ fees is at the discretion of the court: the court will determine which, if any, party substantially prevailed on its claims or defenses, and will award fees accordingly.

Another type of attorney fees’ provision is party specific, and indifferent to who wins or loses. These are unilateral fee-shifting provisions. For example, “If it shall be necessary for General Contractor to file suit against, or defend any claims by, the Subcontractor arising from or related to this Agreement, then General Contractor shall be entitled to reasonable attorneys’ fees in addition to any judgment or award it receives.” Sometimes these provisions are found to violate public policy and a court will decline to enforce them. Generally, this happens when the party asserting their right to attorneys’ fees has been sanctioned or has been brought frivolous claims. In that case neither party can recover attorneys’ fees. 

Civil lawsuits are expensive and attorneys fees can accumulate quickly. Unfortunately, you will likely not be able to recover the costs of your fees in a lawsuit unless there is a contract provision specifically allowing for an award of fees. This is a key contract provision for protecting your business and ensuring that you can recover the costs you will have to spend if another party breaches the contract and you have to pursue payment for your work in court. The attorneys at Galvanize Law Group can help you evaluate whether and how to incorporate an attorney’s fee award provision into your contracts. Contact us to learn more.