I have discussed the need for attorney fee provisions in your construction contracts in prior posts here at Construction Law Musings, but thought it merited a restatement of the reasons for the inclusion of such fee provisions (and changing of such provisions when presented) here with the second of my construction contract basics posts.
Why would you want such a provision? The answer is that without it, or a statute specifically allowing for such fees, a Virginia court will not award your attorney fees without such a provision. Virginia, and a lot of other states, follow the so-called “American Rule” when it comes to attorney fees and costs. In short, that rule states that the parties to litigation pay their own way unless they agree otherwise. While it may seem unfair to make a successful litigant pay for the privilege of being right, that is the rule in Virginia. 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 attorney 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.
A well-stated provision on fees that states unequivocally that the “substantially prevailing” party is entitled to collect its fees as part of a judgment enforcing contractual rights, drafted by an experienced Virginia construction lawyer, will be construed literally and a Court will award attorney fees (how much will be determined at trial). Having one of these clauses does not mean that your attorney is working on a contingency. It does however entitle you to collect those fees after the fact once you have prevailed in your construction contract-related lawsuit.
One caveat (at least here in VA) is that Virginia, unlike some other states, allows for “one-way” attorney fee provisions. In other words, the contract may read that the drafting party will be allowed to collect its fees should it go to court, but the non-drafting (usually “downstream”) party cannot. Be on the lookout for these sorts of provisions in the indemnity, default, and, unsurprisingly, in the dispute resolution portions of a construction contract. Frankly, it would be better for the downstream party to simply strike all references to attorney fees rather than agree to this sort of one-sided provision. I prefer the prevailing party language over no provision at all for the reasons stated earlier, but to allow for such an imbalanced attorney fee provision is far from ideal.
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.
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