Importance of Your Attorney's Fees Clause In Your Contract

 

 

Whether you are a contractor, wedding planner or sell widgets, when drafting your contract you should always make sure you include an attorney’s fees provision.  When drafting the fee provision it is good practice to define who is the prevailing party entitled to recover attorney’s fees.  The failure to do so will result in the Court applying Arizona’s fee statute and its determination as to whom is the prevailing party.  In American Power Products, Inc. v. CSK Auto, Inc., Arizona’s Supreme Court reversed the trial court’s award of attorney fees to Plaintiff and its ruling that Plaintiff was the “prevailing party” in the proceedings below.  Prior to trial the defendant offer $1,000.01 to settle the matter; however, the Plaintiff rejected the offer.  The matter proceeded to trial and the jury awarded Plaintiff $10,733.00.  Plaintiff then requested the Court award its attorney’s fees pursuant to a attorney’s fees provision in the parties’ contract.  The trial court and appellate Court awarded Plaintiff fees in the amount of $775,000.00.  Reasoning that because there was a contract provision for fees, the Court did not have to consider whom is a prevailing party pursuant to A.R.S 12-241.01 .

The Defendant appealed to the Arizona Supreme Court.  The Court held that if a contract includes an attorney’s fees provision but fails to define which party is the “prevailing party”, the Court will determine “prevailing party” as based on Arizona precedent.  Thus because the Plaintiff did not obtain a judgment greater than the $1,000.01 settlement offer, the Plaintiff was not the prevailing party for purposes of awarding attorney’s fees.

 

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