I was recently asked to litigate a breach of contract claim on behalf of a party who was wronged by the breach of another party to a contract. The kind of contract is immaterial for the purpose of this article. It could have been an independent contractor agreement, or employment agreement, or an asset purchase, stock purchase, non-compete, or non-solicitation agreement, or any one of a dozen other types of contracts. Regardless, as I have said previously in these posts, there are certain contractual provisions that should be found in just about every contract. What may be possibly be the single most important provision, from my perspective, happened to have been omitted from this particular contract, that is, a provision addressing the potential recovery of attorney’s fees resulting from litigation.

I say that this may be the single most important provision in a contract not in a substantive sense, as the material terms of the contract must of course be included with specificity. The services to be performed or the products to be sold are obviously vital, since without which there may be no meeting of the minds and thus no contract in the first place. And there are other material provisions related to the deal itself that must be included as well, ie the duration of the agreement, compensation, termination, etc.

But aside from the substantive points of the deal, there is not a more important procedural, boilerplate, provision than a provision addressing attorney’s fees. Why? Because in many cases, the lack of such a provision makes litigating over a contract a financially untenable idea. A party to a contract may have the facts and the law on its side. The case may essentially be a slam dunk, if such things exist. However, if at the end of the day, the damages available to the winning party only barely exceed the amount the party paid to its attorney’s to prosecute the case, then regardless of how great a case it is, the filing of a lawsuit or arbitration makes little sense from a bottom line perspective. None of us, clients or attorneys, litigate in order to achieve moral victories. If maintaining a lawsuit does not make sense from a financial point of view, then regardless of right and wrong and getting even, I always advise my clients to consider the case strictly from a business perspective, leaving aside emotion.

That is why it is such a huge benefit when a contract at issue contains a prevailing party clause with regard to attorney’s fees. This magic language allows a wronged party to sue with the understanding that if the facts and the law support her case, then she will be made whole in regard to not only the actual damages she sustained as a result of the breach of contract, but in addition, all costs, expenses and attorney’s fees she expended in litigating the matter. Please then, I ask you to review EVERY agreement your business has signed, as well as every agreement you sign from here on out, and prior to execution, include a provision similar to the following:

“In the event of litigation [or arbitration] for any matter arising out of or related to this Agreement, the party prevailing in any such action shall be entitled to recover from the losing party its reasonable attorney’s fees and all other legal costs and expenses, including filing fees, expended in the matter.”

The importance of this provision cannot be overstated, since attorney’s fees on even a fairly “routine” matter can easily run into the tens of thousands of dollars, and for more complex cases against defendants with deep pockets, it would not be a surprise to see attorneys’ fees in the hundreds of thousands of dollars.