Key Takeaways

  • An attorney fees clause determines which party pays legal fees in the event of a dispute, overriding the default rule that each side pays its own costs.
  • One-way attorney fees clauses favor one party, while mutual clauses allow either side to recover fees depending on who prevails.
  • Some states, like California, automatically interpret one-way provisions as mutual to ensure fairness.
  • Courts may strike down an unconscionable attorney fees clause if it heavily favors one party or is deemed unfair under public policy.
  • The scope and clarity of the clause are critical — broad language can expose parties to unintended liabilities, while narrow wording limits recovery to contract-based claims.
  • Arbitration agreements and fee provisions must align; inconsistent terms can lead to disputes or unenforceable awards.
  • Parties should ensure the clause defines what constitutes recoverable fees, when they apply, and which party bears them to avoid costly surprises.

An attorney fee clause breaks the default fee rule and identifies which party must pay the other party’s (or parties’) lawyers’ fees and other costs and expenses.

When two or more parties enter into a contract, they may designate, within the legal document, who pays for legal costs, like attorneys’ fees, if a lawsuit is brought. The default rule requires each party to pay their own attorneys’ fees and other expenses, even if they win the case. However, a contract can override this default rule and require the losing party to pay for the winning side’s fees. This is called a mutual provision. Or, a contract can specify only one party that can recover fees if they win. This is called a one-sided provision.

An attorney fee clause has three parts:

  1. The condition a. Defines which events give rise to the right to recover fees b. Can be narrow or broad
  2. The benefactor a. Typically, it is the prevailing party who is entitled to recover their attorneys’ fees and costs
  3. The scope and what is recoverable a. “reasonable attorneys’ fees” b. “costs and expenses” The clause can limit the scope of the right to recover, specifying that only one of the parties can recover fees if they “win."

Clause Example

“In the event of a claim being brought to enforce rights under this contract, the prevailing party shall be entitled to recover its costs and expenses, including but not limited to reasonable attorneys’ fees, incurred in the event of breach of this contract.”

The prevailing party is the party that is awarded the greater relief in the resolution of a dispute. However, if the clause limits the scope of the right to only one of the parties, the clause must explicitly say so and name the party that would be allowed to take advantage of the attorneys' fee clause.

Award of attorneys' fees can be included in a separate provision, but it can also be found as a sub-provision in a fees clause. Some jurisdictions do not include attorneys' fees in their definition of “costs and expenses,” so you may have to include both phrases in your clause, or both clauses, in order to ensure inclusion of the attorneys’ fees.

A contract can contain a broad or narrow attorneys' fees clause. A narrow clause will lead to collecting attorneys' fees if the lawsuit claim is directly related to the contract rights trying to be enforced ONLY. A broad clause will allow the collection of attorneys' fees for BOTH the enforcement of contract rights, but ALSO for any claim arising out of the contact: torts or civil claims.

You should ask your lawyer to draft the attorneys’ fees clause narrowly in order to avoid collection of fees in a tort claim. Use phrases like

  1. in an action to enforce the contract or
  2. in the event of breach of the contract or
  3. in the event of default under the contract

Avoid phrases such as “arising out of” or “related to.” The phrases are broad clauses that will allow collection of fees in non-contract claims.

However, the parties have the right to contract to (decide) what claims the attorneys' fees clause can apply to. If the parties want the clause to cover civil and/or tort claims, they can draft a broad clause. This will include any claim related to their parties’ relationship even if unrelated to the contract itself.

Broad vs. Narrow Attorney Fees Clauses

When drafting an attorney fees clause, the language used determines the scope of recovery. A narrow clause limits recovery of fees to claims directly tied to the enforcement of the contract, such as breach or default. A broad clause, on the other hand, extends recovery to any dispute “arising out of” or “related to” the agreement.

While a broad attorney fees clause may seem protective, it can backfire by including tort or statutory claims that were never intended to be covered. Courts sometimes interpret these broadly worded clauses to include claims such as fraud, negligence, or misrepresentation, significantly increasing the financial exposure for the losing party.

To minimize risk, contracts should specify whether the clause applies only to contract-based disputes or also to extracontractual claims. For instance, replacing “arising out of” with “to enforce this agreement” helps narrow the scope. Clarity and precision can prevent ambiguity that leads to prolonged litigation over the clause’s meaning.

What Constitutes Attorneys’ Fees

  1. Costs of paying the court reporter to transcribe depositions
  2. Costs for interviews
  3. Costs for in-court testimony
  4. Filing fees
  5. Costs and Fees related to serving the defendant or filing paperwork with the court
  6. Paying the jurors (if jury)
  7. Costs of photocopying court papers and exhibits

When Courts May Refuse to Enforce Attorney Fees Clauses

Even if an attorney fees clause is properly drafted, courts may refuse to enforce it under certain conditions. A clause can be struck down as unconscionable if it is too one-sided or results from unequal bargaining power. For example, in Freiberger Haber LLP v. Golden, a court deemed a clause unenforceable because it required an employee to pay all the employer’s fees, regardless of outcome—a clear imbalance violating public policy.

Courts assess procedural unconscionability (whether the weaker party had a fair chance to negotiate) and substantive unconscionability (whether the terms are overly harsh or unfair). If both are present, the clause can be voided in whole or part. This is particularly common in consumer contracts, employment agreements, or arbitration provisions, where one party holds significantly more power.

Businesses should ensure fee clauses are mutually fair and clearly identify recovery conditions to avoid being invalidated during litigation or arbitration.

Key Factors in Drafting Attorney Fee Clauses

When drafting an attorney fee clause, several elements require careful consideration to ensure enforceability and fairness:

  • Clarity of Language: Clearly define terms such as "prevailing party" and the scope of fees recoverable.

  • Event Triggers: Specify the conditions under which fees are recoverable, such as breach or enforcement of contract terms.

  • Scope of Recovery: Indicate whether the clause includes related costs like court fees, expert witness fees, or deposition transcription.

  • Reasonableness of Fees: Avoid ambiguity by specifying "reasonable" attorneys’ fees to minimize disputes over excessive claims.

  • Applicable Laws: Ensure compliance with jurisdiction-specific laws, as some states may interpret or enforce fee provisions differently.

Common Mistakes When Drafting Attorney Fees Clauses

Poorly drafted attorney fees clauses often lead to disputes over enforceability or scope. Common errors include:

  • Using vague or inconsistent terminology, such as “reasonable costs,” without defining what those costs include.
  • Failing to specify the “prevailing party,” leaving courts to interpret which side truly won.
  • Not addressing arbitration or mediation contexts, where different rules may apply.
  • Neglecting jurisdictional compliance, especially in states that treat one-way clauses as mutual or void them altogether.
  • Omitting limits on recoverable amounts, which can lead to excessive fee awards disproportionate to the damages at stake.

To ensure enforceability, contract drafters should also consider including a severability clause, allowing courts to modify or strike an unfair provision without voiding the entire agreement. Legal review before execution can prevent costly litigation over ambiguous or unfair terms.

Mutual vs. One-Sided

A mutual provision is the fairer option for a fee clause. A "one-way provision" allows only one of the parties to receive attorneys' fees. More often than not, it is the party with the more sophisticated or experienced bargaining position. One-way provisions are unfair in that only one party will be required to pay in the event of a loss.

Some states do not allow one-way attorneys' fees contract provisions and read them as mutual provision provisions.

Jurisdictional Considerations for Attorney Fee Clauses

The enforceability of attorney fee clauses can vary significantly by jurisdiction. Key considerations include:

  • State Laws: States like California convert one-sided clauses into mutual provisions unless both parties agree otherwise.

  • Public Policy: Courts may strike down clauses that are excessively one-sided or deemed unconscionable.

  • Judicial Discretion: Judges often assess whether the clause was negotiated fairly and in good faith.

  • Arbitration Clauses: In agreements involving arbitration, ensure the fee clause aligns with arbitration rules and standards. Consulting an experienced attorney can help navigate these jurisdictional complexities.

Attorney Fees Clauses in Arbitration Agreements

Attorney fees clauses often intersect with arbitration agreements, where rules about fee-shifting differ from court litigation. In arbitration, fee recovery typically depends on the terms of the arbitration clause and the arbitrator’s discretion.

Recent appellate decisions emphasize that inconsistent fee provisions between an arbitration clause and a general attorney fees clause can create confusion. For example, in Golden v. WorldQuant Predictive Technologies, LLC (2025), the Connecticut Appellate Court highlighted the importance of aligning fee-shifting provisions with the arbitration framework. The case demonstrated how ambiguity between a contract’s arbitration clause and its fee provision could affect fairness and enforceability.

Parties should ensure their arbitration and attorney fees clauses work together — either by expressly referencing arbitration costs or by specifying which party bears fees under various dispute scenarios. This consistency prevents conflicting interpretations and protects both sides from unintended financial exposure.

Advantages and Disadvantages of One-Way Clauses

One-way attorney fee clauses have distinct benefits and drawbacks:

  • Advantages:

    • Favorable to the party with greater bargaining power, offering financial protection.

    • Encourages settlement to avoid costly litigation for the disadvantaged party.

  • Disadvantages:

    • May deter potential contractual partners due to perceived unfairness.

    • Risk of unenforceability in states that mandate mutual provisions for fairness.

    • Can lead to disputes over interpretation, adding to litigation costs.

Best Practices for Negotiating Attorney Fees Clauses

When negotiating an attorney fees clause, both parties should consider fairness, clarity, and strategic value. Best practices include:

  1. Propose mutual recovery rights to promote fairness and improve enforceability in most jurisdictions.
  2. Define the scope precisely, indicating whether it applies to litigation, arbitration, mediation, or all dispute types.
  3. Set reasonableness limits, ensuring awarded fees are proportional to the damages recovered.
  4. Align with governing law, verifying compliance with state statutes such as California Civil Code §1717, which mandates mutuality in certain contracts.
  5. Negotiate fee caps in high-stakes contracts to avoid disproportionate liability.
  6. Review interaction with indemnification and limitation-of-liability clauses, as overlapping language can create conflicts.

Taking these steps ensures your attorney fees clause remains enforceable, balanced, and tailored to your specific business or contractual context.

Frequently Asked Questions

  1. What is the purpose of an attorney fees clause?
    It identifies which party must pay the other’s legal fees in a dispute, overriding the default rule that each side pays its own costs.
  2. Can a one-way attorney fees clause be enforced?
    Sometimes, but many states—like California—treat one-way clauses as mutual for fairness. Others may strike them down as unconscionable if they heavily favor one party.
  3. Are attorney fees clauses enforceable in arbitration?
    Yes, but the clause must align with arbitration rules and specify whether it covers arbitrator’s fees, filing costs, or legal representation.
  4. What makes an attorney fees clause unconscionable?
    A clause may be deemed unconscionable if it was not fairly negotiated or imposes harsh, one-sided obligations on a weaker party.
  5. How can I ensure my attorney fees clause is enforceable?
    Use clear, mutual language, define recoverable costs, ensure compliance with state laws, and seek legal review to confirm fairness and clarity.

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