Before we get off this topic of who pays legal fees, there’s one other special provision that applies in California.

Have you ever had a contract form presented to you, which provides that if the party who drafted the contract sues you and prevails, you have to reimburse the party for legal fees and other costs, but makes no mention of your rights to be reimbursed if you prevail in the legal action?

Not to worry: California Civil Code §1717 says that even if a contract specifies that only Party A will be entitled to legal fee reimbursement if prevailing, Party B is automatically eligible for court-awarded reimbursement of legal fees and costs if Party B prevails. Most people will see that as fair and equitable.

If you are presented with such an adhesive and unfair contract, it should also cause you to take a moment to consider how you feel about dealing with a firm whose attorney has inserted a clause like this. What else has been inserted that is one-sided and unfair? How much extra effort will your attorney have to undertake to ferret out other such abusive contract terms, and seek their amendment or removal? Have your attorney review a proposed contract BEFORE you sign is always a prudent course of action.

The information presented is not intended to be, and does not constitute, “legal advice.” Because each situation varies, and only brief summary information is provided here, you should not use this information as a basis for action unless you have independently verified with your own counsel that it applies to your particular situation.

It depends.

If you had a dispute with a British firm, and British law applied, then the “loser pays” rule would likely apply. This rule has its roots in the admirable objective of trying to avoid frivolous lawsuits or vexatious litigation, as well as encouraging settlement of lawsuits where one party is clearly “in the right” and is likely to prevail if the matter goes to trial.

But the “American Rule”, which applies in most states, allows the prevailing party, in most legal disputes that go all the way to trial, to be reimbursed for costs and attorney fees only if that is specified in a written contract, provided for as a matter of specific statute because a significant public benefit was vindicated, or for certain types of actions alleging fraud.

Awareness of the likely result if a dispute arises, with regard to this issue of legal-fees reimbursement, can also be an issue when your attorney is drafting a contract for you. Should every contract contain a “loser pays” legal fee clause? Some attorneys would say “always” or at least “almost always”. Others might argue, at least for particular types of contracts, that you’re better off without such a clause, because that will discourage lawsuits by either party unless they’re “strong.”

What it comes down to is this: the inclusion or exclusion of a “loser pays” provision in a contract into which you enter can be a strategic decision, often based on “legal factors” with which most laypersons will not be familiar. At the very least, you should discuss this subject with your attorney to better understand his personal preferences regarding various contractual provisions, because the ultimate decision resides with you as to whether particular provisions such as this should be included or excluded.

The information presented is not intended to be, and does not constitute, “legal advice.” Because each situation varies, and only brief summary information is provided here, you should not use this information as a basis for action unless you have independently verified with your own counsel that it applies to your particular situation.