I just did some work for a lawyer and we got talking about alternative dispute resolution and attorneys fees clauses. The dispute resolution I have covered–you can’t sue me and I can’t sue you without first going thru arbitration. Attorneys fees are not addressed in my contract. He was adamant that this was an important thing to include, and stated that he had been in court representing contractors suing their clients for payment more than once.
The main legal thing I can imagine happening is having to file a lien and then hiring an attorney to ‘perfect’ it to get paid. In that case, I assume that the best possible outcome is I would be paid the balance owed but nothing for my trouble and legal expense. Attorney fees and court costs in something like that have got to be at least a few thousand bucks, which basically means walking away if someone stiffs me a few thousand bucks. Not acceptable… I wanna close that gap if I can.
Would/could an attorney fee clause address this? Anyone been thru this or have experience in this area? What’s your contract say?
Replies
there's nothing wrong with an attorneys fee clause, but consider the down side of mutuality. Loser pays the winner's attorneys fees. That means that both sides are at risk. And sometimes, the HO wins.
As for arbitration clause, many of these cases would go to small claims court. Arb costs more and lacks the finality.
SHG
For every complex problem, there is a solution that is clear, simple, and wrong.
-H.L. Mencken
Arbitration clauses seem almost standard for the GCs I know, but you make a good point.
What's your opinion on the applicability of an attorney fee clause to the lien process a GC would go thru to get paid? Or is there some way to address legal costs in the lien process itself?
like most things legal, it's got its good and bad points. if you anticipate getting sued by your customers, then it's a bad thing. if you anticipate getting stiffed by your customers, it's a good think. on the other hand, maybe you need better customers?
SHGFor every complex problem, there is a solution that is clear, simple, and wrong.
-H.L. Mencken
So far I have a virtually perfect record collecting money.... down about $60 in almost 20 years and that was due to my own lack of explaining sales tax to a customer. So, no need for different clients, I'm just looking to understand the best legal ground to be on. I definitely do not expect my clients to sue me, so maybe I'll look into adding the clause. You haven't answered my question about how the lien process and the costs of legal action would work.
Both the AIA and ACG forms address this. Don't be too eager to include an attorney fee clause, without thinking it through.First, if the clause is broadly worded, then yes you will be able to collect your fees, but if some clown sues you on a construction defect case, then you will be liable for his fees too. This is not a good thing.Second, if you opt to include attorney fees, most real estate broker contracts have a clause for attorney fees ONLY in the event that the customer does not pay, and mediation is demanded, and the parties refuse to mediate. This gets the customer to the table.Third, I like the approach of No. 2, but I would include a clause that says if the case doesn't settle in mediation ya'all get attorney fees but ONLY for either proseuction or defense of the unpaid invoices. You don't get attorney fees for prosecuting or defending any other action relating to the contract.Regards,
Boris"Sir, I may be drunk, but you're crazy, and I'll be sober tomorrow" -- WC Fields, "Its a Gift" 1934
Great advice, you're a genius. The only real concern I have is around payment and the cost of getting a lien filed and paid. If I ever have to do that I do not want to be out the attorney and court costs. Almost all of the lumberyard invoices I've signed in the last 20 years have language at the bottom about how the buyer must pay any costs of collection, including reasonable attorney fees. Wonder why I didn't think of that.
I'm no genius, just been around.Regards,
Boris"Sir, I may be drunk, but you're crazy, and I'll be sober tomorrow" -- WC Fields, "Its a Gift" 1934
I represent contractors and owners. For contractors, the easiest method to cover your legal fees is to add a provision to your invoices, stating that in the event of non-payment, you are entitled to costs of collection, including reasonable attorneys fees. There should be a conspicuous disclaimer when you deal with a consumer telling him he is waiving his right to a jury trial. Some states may not permit this.
I never cease to be amazed at contractors who don't use a lawyer to review and revise the contractor's standard contract. It's cheap insurance.
can't answer your lien process question. it's different state by state. it's also different in practice in different areas. In some places, GCs routinely file liens. In others, they only do after they get stiffed. so that question will need someone more familiar with your local situations. Also, when people say to me that I haven't answered their legal question yet, the clock starts to run. ;-)
SHGFor every complex problem, there is a solution that is clear, simple, and wrong.
-H.L. Mencken
Is there any reason that it has to be an all or nothing?Such as it shall go to arbriation unless the amount is less than (fill in the state small claims limit) and both parties agree then it can be filled in small claim court.And a complete separte section allowing for attorney fees on filling and perfecting liens.
You can put in anything you like. Sometimes it works, other times not. Part of the problem is that it is according to the law of your jurisdiction, and then according to what some judge decides is proper when push comes to shove.
But psychologically, if you state things in your contract or on your invoice, most people just take for granted that that is the deal and live with it. Sometimes, even judges buy it.
SHGFor every complex problem, there is a solution that is clear, simple, and wrong.
-H.L. Mencken
David-Shg's right, it gets kind of interesting sometimes. What happens if you sue for $1000, customer counterclaims for $500, and the judge or jury awards you only $500? Did you win, or did they? Sometimes the existance of the clause alone is enough to get the parties to the table to work something reasonable out. It's not a bad thing to have, unless you lose.