Why Attorney Fees Provisions Must Be in Your Contracts

Murphy's Law and ConstructionThis past July, the Roanoke Circuit Court reminded us all of the need to put attorney fees provisions in construction contracts. In the case of Shen Valley Masonry, Inc. v. Thor, Inc., et al., the Court, among other rulings, allowed the defendant to collect its attorney fees because Thor had such a provision in its contract. A great analysis of this case and its various holdings can be found at the Virginia Real Estate, Land Use & Construction Law Blog and I recommend that you look at this analysis that I won’t repeat here.

What I wish to focus on here, however, is the fact that had Thor failed to put an attorney fees provision in its construction contract, the Court would not have even considered the request, much less provided the additional analysis of the procedural posture of the case. The reason for this is that Virginia, like many states, follows the so called “American Rule” relating to attorney fees. In short, this “rule” states that all parties to a lawsuit will pay their own attorney fees unless a contractual provision or statute states otherwise.

Throw in the fact that Virginia courts strictly construe construction contracts and voila we have a situation where, without a provision in the contract stating that one party or both will be able to collect attorneys fees should that contractor or subcontractor prevail, a construction professional that gets sued (whether rightly or wrongly) will be left with a hefty attorney fees bill and no way to recoup those fees through the courts or any other method.

The proper statement of such a provision can take the form of indemnity, straightforward fees provision, or any combination. These provisions can be one way (e. g. the general contractor can collect the fees if it prevails, but the subcontractor cannot) or “prevailing party” (e. g. whoever wins gets its fees). The more a subcontractor is likely to get in a negotiation is the prevailing party type. In any event, the assistance of a construction lawyer versed in the preparation of such provisions (and others that should be standard in construction contracts) will help make sure that you, as a construction professional, are able to collect your attorney fees in the event that you are forced into court or arbitration.

In a world where Murphy was an optimist, a well drafted and enforced attorney’s fee provision in your construction contract is a necessity. Without it you could be left holding a large lawyer’s bill with no way to recover those costs.

As always, I welcome your comments below. Please subscribe to keep up with this and other Construction Law Musings.

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13 Responses to Why Attorney Fees Provisions Must Be in Your Contracts
  1. hardhatblog (Hardhat Blog)
    September 13, 2010 | 9:09 AM

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    Why Attorney Fees Provisions Must Be in Your Contracts [link to post] #constr #musings

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  2. build2sustain (Build2Sustain)
    September 13, 2010 | 9:10 AM

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    Why Attorney Fees Provisions Must Be in Your Contracts: This past July, the Roanoke Circuit Court reminded us all … [link to post]

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  3. […] Why Attorney Fees Provisions Must Be in Your Contracts (constructionlawva.com) […]

  4. Sarah Long
    January 24, 2011 | 9:37 AM

    Always read through the contract. You really never know the details until you do so.

    Sarah
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  5. […] Why is this a big deal? As a solo practitioner who represents contractors and subcontractors in cases big and small, this increase is a boon to my practice and the collect-ability of some debts. I think back to the numerous conversations I have had with clients who had bona fide claims for around $20,000. These conversations inevitably turned toward the cost of Circuit Court versus General District Court and whether it would be better to leave money out of the claim to avoid the ramped up attorney fee and filing costs (not to mention the time from filing to judgment). This conversation was especially relevant in the instance where the contracts did not contain an attorney fees provision. […]

  6. Brian
    April 13, 2011 | 12:03 AM

    I know you’re a Virginia attorney, but do you know anything about the law in surrounding jurisdictions? Would you say Virginia is more or less strict constructionist on contracts than the surrounding states?
    Brian recently posted..When LLC Owners Can Be LiableMy Profile

  7. Christopher G. Hill
    Twitter:
    April 13, 2011 | 8:07 AM

    While I’m not totally familiar with neighboring states, I do know that VA is very strict.

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  11. […] and edited a subcontract presented to you or provided a well drafted contract to the other party that contains an attorney fees provision, every dollar that you spend on litigation is a dollar less of […]

  12. […] by keeping them out of court. Litigation is not a money making strategy. In fact, regardless of attorney fees provisions and other ways to soften the blow of a hole in the income stream and the expense of litigation or […]

  13. […] and edited a subcontract presented to you or provided a well drafted contract to the other party that contains an attorney fees provision, every dollar that you spend on litigation is a dollar less of […]

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About Musings

I am a construction lawyer in Richmond, Virginia, a LEED AP, and have been nominated by my peers to Virginia's Legal Elite in Construction Law on multiple occasions. I provide advice and assistance with mechanic's liens, contract review and consulting, occupational safety issues (VOSH and OSHA), and risk management for construction professionals.

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