Attorney Fees Clause

Under the American Rule, each party normally pays their own attorney fees regardless of who wins a lawsuit. An attorney fees clause flips this: if you lose, you pay the other side's legal bills, which can easily reach tens or hundreds of thousands of dollars in complex litigation. This creates enormous deterrence against asserting even legitimate claims, because the financial risk of losing is amplified. Conversely, if you win, you may be able to recover your own legal fees. One-sided attorney fee clauses — where only the other party can recover fees if they win — are particularly dangerous. California has a statute (Civil Code §1717) that makes one-sided attorney fee clauses in contracts mutual, but many states do not offer this protection. In employment and consumer contexts, fee-shifting clauses are often used as a litigation weapon.

Negotiate to remove the clause entirely, or make it mutual (both sides recover if they win). If mutual, ask for a cap on recoverable fees. In California, one-sided clauses in contracts are automatically made mutual by statute — but you should still flag it for an attorney in your state.