Attorney’s Fee Clauses in Contracts
The general rule in Indiana is that when a party goes to court, it must pay their own attorney’s fees—even if they win. While there are certain exceptions to this rule, such as when a statute provides for recovery of attorney’s fees, or where one side asserts a frivolous position, the general rule is that each side must pay their own attorney’s fees.
Given this background, it is common to see attorney’s fee clauses in contracts. However, like any contractual provision, the particular language used in the contract is important. For example, while many attorney’s fee provisions are written such that the “prevailing party” has the right to recover their fees, it might not always be so clear as to who the prevailing party is, depending on the type of case. Also, the contractual language may limit recovery of attorney’s fees to a “reasonable” amount. Determination of what constitutes a reasonable amount will often have to be determined by the court. Additionally, depending on how the provision is drafted, there could also be a question as to whether paralegal fees and/or costs of the lawsuit are to be included in an attorney’s fee provision.
In short, while attorney’s fee provisions are often included in contracts, the parties should pay particular attention to the precise language used to ensure such provision is even appropriate to the context of their situation, and if so, whether the scope of the provision is in accordance with the parties’ understanding.