Agreements

One of the sad truths a business litigation lawyer must explain to their client is that sometimes the cost of going to court exceeds the amount of damages that can be recovered. This is true because in California, unless there is a special statute that allows the recovery of attorneys’ fees, those fees are not recoverable unless they are required by a written contract. This is one of the problems with an oral agreement; if a party breaches the agreement, the aggrieved party is not entitled to recover attorneys’ fees. Because of this rule, arguably the most important clause in a contract can be the attorney fee provision. This is the second installment of a multi-part blog that explains some of the more common provisions found in California agreements.

Unilateral Attorney Fee Clauses. In some states unilateral attorney fees provisions are permitted. An example of a unilateral attorney fee clause would be a clause that says if Company A has to sue Company B and prevails, Company B must pay Company A’s attorney fees. This leaves Company B with no attorney fees if it wins. In California unilateral attorney fee provisions are automatically construed to be reciprocal under Civil Code section 1717. Therefore, in the example above, Company A would still be allowed attorney fees even though the contract seemed to provide for attorneys’ fees only if company B won. Part 1 of this blog dealt with Choice of Law, Jurisdiction and Venue provisions. This is an excellent example of why choice of law provisions are critical. In California, unilateral attorney fee clauses are not allowed, in other states they are.
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The standard legal provisions that appear at the end of a contract are often called “boilerplate provisions.” Although most people are not interested in the fine print of a contract, these provisions are important and because of the nuances in California law, it is important to understand why those provisions appear in your agreement. In fact, one of the biggest problem with online legal forms is that many of them have flawed or no standard legal provisions appropriate for California. The failure to include a critical provision can cost you tens of thousands of dollars in damages and legal fees if something goes wrong.

This is the first installment of a multi part blog that explains some of the more common provisions found in California agreements such as Choice of Law, Jurisdiction, and Venue. Before you sign any business contract, service contract, real estate agreement or other agreement whatsoever, it is important to have that agreement reviewed by an experienced business attorney who can make sure you understand and can live with all the provisions of the agreement. Indeed, as noted in a recent case, Ruiz v. Affinity Logistics Corp., even if the contract does include a choice of law provision, it does not necessarily mean that the provision is actually enforceable. There are many rules that go into determining if the clause, as drafted, will be upheld by a court.
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Articles Tagged with Agreements

Boilerplate: What Does the Fine Print Mean? Part 2 – Attorney Fee Provisions

Boilerplate: What Does the Fine Print Mean? Part 1 Choice of Law, Jurisdiction and Venue