Small Business Tip: Include Provision in Your Contracts to Recover Attorneys’ Fees

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Reason to Add an Attorney Fee Provision

You’re running a small business. You have a form, purchase order, or other short contract you always use.  Take a moment to look at your forms and contracts. Do they include an attorney fee provision?  If not, we recommend that you add one.

If someone fails to pay you, you might need to file a lawsuit to recover what you are owed. Going to court is expensive.  In Tennessee, each party is responsible for paying their own attorney fees. That’s right–even if you win in court, you generally can’t make the other side pay your attorney fees unless you have an attorney fee provision in your contract.  For more information on attorney fees, read this blog post.

Sample Attorney Fee Provision

If any party institutes any action or proceeding to enforce any provision of this contract by reason of any alleged breach of any provision herein, the prevailing party shall be entitled to receive from the losing party all legal fees and costs incurred in connection with any such proceeding.

We are Small Business Lawyers.

Check out our team at Wiseman Bray PLLC.  If you need help with your small business contracts, agreements, or forms, or if you have a question about business litigation or the recovery of attorney fees in a lawsuit, please call us at 901-372-5003 or email us here. We have offices in Memphis and Nashville TN.

 

 

Get it in writing: A handshake probably won’t do.

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The Dangers of Unwritten Agreements

You’ve heard it before:  “If it’s not in writing, it doesn’t exist.”  While that is not technically true, we don’t recommend entering into an unwritten agreement or contract of any significance.  If it is important to you or to your business, get it in writing. Unwritten agreements, or oral contracts, can be legally enforceable in Tennessee in certain cases, but they are extremely difficult to prove in court.

Contracts Required to be in Writing

According to a legal rule called the “statute of frauds,” there are some agreements that are required to be in writing in Tennessee, including:

  • An agreement to pay someone else’s debt
  • An agreement concerning the sale of real property or land
  • A lease with a term longer than a year
  • A contract that can’t be performed or concluded in a year
  • A contract for the sale of goods for over $500.00

What Should a Contract Say?

Any contract should contain the essential terms of the agreement. The contract should clearly spell out what each party is going to do in plain language.  Say what you mean, and mean what you say. If you don’t clearly spell out your intentions in a contract, then you run the risk of having a judge decide what your agreement means.  You wouldn’t believe the number of cases in Tennessee where courts have had to interpret contract terms and agreements because of drafting failures on the front end.  Do you really want a judge telling you what your contract says?

Be Smart: Hire an Attorney During Contract Negotiations

Contract law and litigation can be complicated, but it doesn’t have to be. One way to avoid disagreements, misunderstandings, and the high cost of contract litigation is to involve an experienced lawyer during contract negotiations.  Many people believe that hiring a lawyer during contract negotiations will signal distrust of the other party, but that is not true in today’s business world. It is common, and usually expected, that attorneys will be involved. We are often successful in obtaining favorable contract language for our clients that they would have never known to request had they not involved an attorney.  It is sometimes a matter of knowing what to ask for, and we can help you with that.

We are not only experienced in drafting and reviewing agreements and contracts, but we are trial attorneys.  Call us today at 901-372-5003 if you need help with a contract or agreement.

Can We Make Them Pay My Attorney Fees?

Can We Make Them Pay My Attorney Fees?scales

Can we make them pay my attorney fees? This is one of the most common questions we receive from our clients who find themselves involved in lawsuits. Unfortunately, the answer in most cases is no. Tennessee follows the “American Rule” which means that each party in a lawsuit pays their own attorney fees, no matter who wins. There are, however, exceptions to this rule. Two of the most common exceptions are as follows:
(1) Certain state and federal statutes allow the prevailing party to recover attorney fees. Examples: certain consumer protection, civil rights, and employment claims, etc.

(2) A contract provision where the parties to a contract have agreed that the prevailing party in a dispute will be entitled to recover attorney fees. Examples: leases, commercial contracts, collections, home sale contracts, etc.

Your attorney should examine the allegations in the lawsuit and any contracts that may apply to determine whether it is possible for you to recover your attorney fees. If you are a business person and you don’t have attorney fee provisions in your contracts, consider adding them. Here are some answers to additional questions we are frequently asked about attorney fees:

“This lawsuit is frivolous! Can we make them pay for all the money I have to spend dealing with this?” The standard for “frivolous” is pretty high. Even lawsuits that are eventually determined to have no merit are not necessarily frivolous. Very few cases are. Unless your case meets one of the exceptions, you probably can’t recover your attorney fees, even if you win.

“My contract provides for attorney fees. What are the chances I actually recover them?” If you are the prevailing party and you obtain a judgment, that judgment should include an award of what the judge deems a reasonable attorney fee. Your award may or may not equal what you actually paid your attorney. If your case is resolved through settlement, the attorney fee provision is often used as a negotiation point to increase the overall amount of money you recover.

“If the judge awards me an attorney fee of less than what I actually paid my lawyer, does my lawyer have to give my money back?” It depends on what your fee agreement is with your lawyer, but in most cases, the answer is probably no. Your fee agreement with your lawyer is independent of any judgment you may recover from the opposing party.

If you need help drafting an appropriate attorney fee provision for your contracts, or if you have a question about recovery of attorney fees in a lawsuit, please call us at 901-372-5003.