Common Contract Clauses: Prevailing Party
A prevailing party clause (also known as an attorneys’ fee clause) is found in some but not all contracts. The effect of this clause is that, in the event of a lawsuit over the contract, whoever wins (i.e., the “prevailing party”) is entitled to reimbursement of their legal fees from the losing party.
Careful consideration should be given before agreeing to a contract containing a prevailing party clause. It’s one of those clauses that may look like boilerplate “legalese” but it can have profound consequences and should not be treated carelessly.
If you are concerned that the other party may breach the contract, then it may be worth including a prevailing party clause as a deterrent. (It may also be worth reconsidering contracting with the altogether.) A party that might otherwise be willing to breach a contract for opportunistic reasons would be unlikely to do so if there is a prevailing party clause in place—it rarely makes economic sense to fund another parties’ lawsuit against you.
If you do have a prevailing party clause, it’s imperative that you fulfill your contractual obligations and maintain “clean hands.” Otherwise you might find yourself paying someone else to sue you!
Other Common Contract Clauses