Attorneys' Fees Clause Explained: Six Versions to Check Before You Sign
This page is general information, not legal advice.
An attorneys' fees clause decides who pays the lawyers if there's a dispute about the contract. It can look like boilerplate, but it changes the math of every disagreement. If only the other side can recover legal fees, they can threaten a claim cheaply while you face the risk of paying both sides' bills. If nobody can recover fees, a small unpaid invoice may not be worth chasing. This page covers six common versions of the clause that tilt the risk. For each one you get an illustrative example, why it matters, and wording you can propose. How these clauses are read and enforced varies by jurisdiction, and they can often be negotiated.
The example clauses below are illustrative. They are not taken from any real company's contract.
Why the clause matters: the default rules
In the United States, the general starting point (often called the "American rule") is that each side pays its own lawyers, win or lose, unless a statute or a contract says otherwise. That's why fee clauses are so common in US contracts: they replace the default. Many other countries start from a different position, where courts often order the losing side to pay at least part of the winner's legal costs. A fee clause may have a different effect, or be partly overridden, depending on where the dispute is heard. That's one reason to read it alongside the governing law and jurisdiction clause.
1. A clause that only works one way
A typical clause might read: "Contractor shall reimburse Client for all attorneys' fees and costs incurred by Client in enforcing this Agreement."
Why it works against you
Only the client can recover fees. If the client breaches and you have to sue to get paid, you pay your own lawyer. If the client sues you, even over something minor, you may end up paying theirs. Rules on one-sided fee clauses vary by jurisdiction. Some places limit them or rebalance them so they work both ways, but many have no such rule, so don't count on it.
What to ask for instead
Sample wording to propose: "In any action to enforce this Agreement, the prevailing party is entitled to recover its reasonable attorneys' fees and costs from the other party."
2. Fees "whether or not suit is filed"
A typical clause might read: "Client shall be entitled to recover all attorneys' fees, collection costs and expenses incurred in connection with any dispute, whether or not suit is filed and regardless of outcome."
Why it works against you
This version covers fees for sending demand letters, reviewing your work, or preparing for a dispute that never reaches court. "Regardless of outcome" means you could pay even if you're right. The cost can grow without any judge ever checking whether it was reasonable.
What to ask for instead
Sample wording to propose: "Fees are recoverable only by the prevailing party in a lawsuit or arbitration, and only to the extent awarded by the court or arbitrator as reasonable."
3. No definition of "prevailing party"
A typical clause might read: "The prevailing party in any dispute shall be entitled to recover its attorneys' fees."
Why it works against you
A mutual clause is fairer, but it can still cause trouble. Disputes often end with mixed results: you win on the unpaid invoice, the client wins on a late-delivery claim. Who "prevailed"? Without a definition, that question can turn into a separate argument, with its own legal costs. Courts in different places answer it differently.
What to ask for instead
Sample wording to propose: "The prevailing party is the party that obtains the greater net monetary recovery or substantially obtains the relief it sought. If neither party substantially prevails, each party bears its own fees."
4. Fees buried in an indemnity
A typical clause might read: "Contractor shall indemnify and hold Client harmless from any claims, losses and expenses, including reasonable attorneys' fees, arising out of or relating to the Services."
Why it works against you
This isn't labelled as a fee clause, but it can work as one. "Arising out of or relating to the Services" is broad, and it may make you pay the client's legal bills for third-party claims, or even disputes between you and the client, with no requirement that you were at fault. Indemnity obligations also sometimes fall outside the liability cap. See indemnification clauses explained and limitation of liability clauses explained.
What to ask for instead
Sample wording to propose: "Contractor's indemnity, including attorneys' fees, applies only to third-party claims caused by Contractor's breach, negligence or willful misconduct, and does not apply to disputes between the parties. It is subject to the limitation of liability in Section [X]."
5. Fees combined with arbitration costs or a distant forum
A typical clause might read: "All disputes shall be resolved by arbitration in [distant city]. The non-prevailing party shall pay all arbitration fees, arbitrator compensation and the other party's attorneys' fees."
Why it works against you
Arbitration and travel can be expensive. Loser-pays terms on top of them raise the stakes of bringing any claim, and the side with more money is usually better placed to take that risk. For a freelancer or consumer, the combination can make a valid claim not worth pursuing. Some arbitration rules and some jurisdictions limit how costs can be shifted onto individuals, but the rules vary. See mandatory arbitration clauses explained and class action waivers explained.
What to ask for instead
Sample wording to propose: "Either party may bring claims under [amount] in small claims court where the defendant is located. Arbitration fees will be shared equally unless the arbitrator decides otherwise, and attorneys' fees follow the prevailing-party rule in Section [X]."
6. No fees clause at all, when you're the one who gets paid
A typical situation: the contract says nothing about legal fees, and your invoices are a few thousand dollars or less.
Why it works against you
If you're a freelancer or small provider, you're the side most likely to need to enforce the contract, usually to get paid. Under a pay-your-own-fees default, hiring a lawyer to recover a small invoice may cost more than the invoice. A mutual fee clause gives clients a reason to pay rather than wait you out. Pair it with clear late-fee and payment terms. See late payment fee clauses explained and payment terms net 30 explained.
What to ask for instead
Sample wording to propose: "If Contractor must take legal action or use a collection agency to recover unpaid amounts, Client will pay Contractor's reasonable attorneys' fees and collection costs, in addition to the amount owed."
Also worth a look
Check for a "costs of collection" line in the payment section, a personal guarantee that makes you personally responsible for fees (see personal guarantee clauses explained), and whether the fee clause survives termination. If the agreement has an entire agreement clause, any promise about fees made outside the document may not count. For a wider checklist, see freelance contract red flags and service agreement red flags.
Scan your own contract free
A few words like "regardless of outcome" can decide whether a dispute is worth fighting. Upload your contract to the ScanMyTerms freelance contract review as a PDF, DOCX, TXT or MD file, photograph it (up to 30 pages), or paste the terms. In about a minute you get a list of clauses that work against you, with the risk level, the exact wording, why it hurts and how to change it. The free preview shows the risk count and the first two findings. The full report is $5 per document.
This page is general information, not legal advice. Rules on recovering legal fees vary by jurisdiction, so for decisions about a specific contract, talk to a qualified lawyer where you live.
Sources
- All clause examples on this page are illustrative and written for this guide. They are not quoted from any real company's contract.
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