Attorney Fees in Contracts: Why the American Rule Makes a Fee Clause Your Best Protection
One of the most common questions I get as a litigator is this: “If I win, will I get my attorney’s fees back?” Most clients are surprised when I tell them the answer is usually no.
The American Rule: Each Side Pays Their Own Fees
Under what’s known as the American Rule, each party is responsible for paying their own attorney fees—whether they win or lose. There are a few statutory exceptions, but in business litigation, the default rule is clear: even if you win, you’re still writing the check for your lawyer’s bill.
This surprises many clients, and it’s one of the biggest reasons lawsuits settle. A settlement for a sum certain typically doesn’t include attorney fees, which means both sides compromise to avoid paying mounting legal costs.
The Power of an Attorney Fee Clause
The best way to protect yourself against the American Rule is simple: negotiate an attorney fee clause into your contracts. These provisions state that the prevailing party in any dispute is entitled to recover reasonable attorney fees and costs.
When included, a fee-shifting clause changes the entire litigation landscape:
- Deters Breaches: The other side knows they may end up paying both sides’ fees if they lose.
- Strengthens Leverage: You’re negotiating from a position of power when the other party risks double exposure.
- Makes Enforcement Viable: Smaller claims become worth pursuing because you’re not eating your entire recovery in legal bills.
Why Attorney Fees Drive Settlements
Without a fee clause, litigation costs often exceed the damages in dispute. This is why so many business cases settle for a negotiated number—because each side wants to stop the financial bleeding. If attorney fees were recoverable by default, far more cases would go to trial. But under the American Rule, compromise is often the most rational outcome.
Protect Yourself Before the Dispute
The best time to think about attorney fees is before you sign the contract. If you don’t insist on an attorney fee clause, you may win your case but still lose financially.
At JDE Law Firm, PLLC, I advise clients every day on fee provisions and their importance. If you’re signing a new agreement or facing litigation, make sure you understand your exposure—and whether the other side could end up paying your legal bills.
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