How important is an attorney’s fee clause?

When writing a contract people usually think that putting in the basics about what they are agreeing to and some standard legal language will cover everything with the agreement. However, most people don’t like to think of the possibility that something may go wrong with their contract and may end up having to take that document to court to enforce either the completion of what was set forth within the contract or whatever remedy was set forth for breaching said contract. This lack of forward thinking sometimes leads to losing out on some valuable compensation.

The referenced case, Fidelity v. Americaribe, is about the awarding of Attorney’s Fees on a Contract. Originally, Americaribe had entered into a subcontractor contract with a company named CPM. As part of this contract, there was a portion labeled Section 9.5 which allowed for the recovery of Attorney’s Fees as part of an Indemnification clause, but there was no general award of attorney’s fees for either party having to take action to enforce the subcontract. As part of this Subcontracting deal, Americaribe sought to have Fidelity sign on a Performance Bond. The performance bond incorporated the subcontract but did not contain its own provision providing for attorney’s fees. When CPM defaulted on their responsibilities, Fidelity elected to have a separate company complete the work.

Americaribe stated that this was against their performance bond contract as they were not notified of Fidelity’s choice to contract a separate company and did not receive permission from Americaribe as per the terms of the performance bond. As part of the dispute, Fidelity argued that they were entitled to attorney’s fees as part of the Indemnification section of the subcontract claiming, “it ‘stepped into the shoes’ of CPM.” The court initially agreed and awarded $154,536 in attorney’s fees. However, upon appeal, the courts reviewed the contract de novo and found that contracts for attorney’s fees must unambiguously state that the prevailing party is entitled to attorney’s fees. Furthermore, they stated that an indemnification clause was not to be construed to award attorney’s fees to the parties to the contract, but instead to an injured third party to the contract. Due to this ruling, the decision of the lower court awarding $154,536 was reversed.

The lesson to be gained from this case is unambiguous language should be used when writing out all contracts. Furthermore, an expressed agreement on the awarding of attorney’s fees should also be included in any contract that you write. The court will not look to a statute as there is not an arbitrary award for fees in any statute other than the 57.105 language that was quoted in the case, and this mostly applies to the filing of frivolous suits.

If you are interested in drafting proper attorney’s fees clauses, please do not hesitate to contact one of our knowledgeable attorneys at EPGD Business Law, located in beautiful Coral Gables and historic Washington, D.C. Call us at (786) 837-6787 or email us to schedule a consultation.

*Disclaimer: This blog post is not intended to be legal advice. We highly recommend speaking to an attorney if you have any legal concerns. Contacting us through our website does not establish an attorney-client relationship. *