Who pays for legal fees in a contract dispute?

People in the construction industry know that some disagreements and misunderstandings are an inevitable part of almost every single project. In a complicated construction project, architects, contractors, subcontractors and other parties are all expected to speak the same language and hold up their end of the bargain, but when something goes wrong, each party scrambles to protect themselves from liability. Whether it is a design flaw, construction defect, delay or failure to perform, contract disputes happen, and when they do, these parties need to reach a solution. Sometimes that solution isn’t possible without litigation or arbitration, but before things every get that far, it’s important that contractors protect themselves by drafting and executing good contracts.

Some construction contracts call for the losing party in the dispute to pay the legal fees, not just their own, but in some cases they can be required to pay the winning party’s legal fees as well. But even when a contract calls for the losing party to pay the legal fees, determining who the clear-cut winner is in a dispute is a very difficult proposition.

Of the myriad issues in most contract disputes, a party may prevail on only a single issue or sub-issue, making the question of winning a relative and subjective issue most courts have trouble addressing with consistency. Provisions like this aren’t always enforced to the full extent, but they do have the effect of dissuading a party from resorting to litigation prematurely. Nobody wants to pay the other side’s legal fees.

Some other contract provisions include arbitration clauses, which seek to avoid the prospect of litigation entirely. By enlisting an agreed-upon and neutral arbitrator or body of arbitration, parties may be able to save time, money and reach a quicker solution than they could through litigation, which can drag on indefinitely in a complex contract dispute. When drafting a contract or preparing for a dispute, people should enlist the services of an experienced California construction consultant and attorney.

Source: Construction Law Today, “Attorneys Fee and Cost Provisions In Construction Contracts: Part 1 – Who Is The Prevailing Party?,” accessed Feb. 15, 2015