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Can You Recover Your Attorney’s Fees?

When Can You Recover Attorneys’ Fees?

A common question by clients is whether they can recover the fees they’ve paid to their lawyer. The answer to that question can be complex. As a general principle, the “American Rule” provides that each party will ordinarily bear their own costs for attorneys’ fees.  This means that even if you ultimately win at trial, the losing party does not have to reimburse your expenses. In Virginia, courts adhere to the American Rule. As you can imagine, the possibility of incurring substantial attorneys’ fees can have a huge impact on whether or not to pursue a claim, especially for small businesses. 

Fortunately, there are exceptions to the American Rule. One such exception is the inclusion of an “attorneys’ fees provision” in your contract. Attorneys’ fees provisions come in a number of different shapes and sizes, and it’s important to understand their application. As a smaller company, you will likely look for the inclusion of a “two-way” provision.

Example – “Two-Way” Provision

In the event of any action to enforce rights under this Agreement, the prevailing party shall be entitled its costs and expenses, including reasonable attorney’s fees.

This provision allows either contracting party to obtain reimbursement for their attorneys’ fees, should that party’s claim prevail. However, larger companies or companies with better bargaining power may push for the inclusion of a “one-way” provision.

Example – “One-Way” Provision

In the event of any action to enforce rights under this Agreement, XYZ Corp. shall be entitled its costs and expenses, including reasonable attorney’s fees.

This provision provides an enormous benefit to “XYZ Corp.” XYZ Corp. can obtain reimbursement for its attorneys’ fees should its claim prevail, while the other party cannot.

The inclusion of an attorneys’ fees provision can help prevent litigation or foster early settlement where liability is in question. Before entering into any contract, it’s important to understand the risks or benefits of any attorneys’ fees provision.