Monday, January 12, 2009

Contract Law: Statutes That Make Contractual Relief Reciprocal.

Prior posts have covered exceptions to the American Rule, the generality that parties pay their own attorney fees in litigation. An additional point concerns a potential nexus between contractual and statutory exceptions to the Rule. In Washington, when a contract contains a clause providing that only one party may recover attorney fees in the resolution of a dispute, such a remedy (no matter how one-sided it is written) can be made reciprocal or mutual by statute.


Revised Code of Washington 4.84.330 provides in pertinent part that: "In any action on a contract or lease entered into after September 21, 1977, where such contract or lease specifically provides that attorney's fees and costs, which are incurred to enforce the provisions of such contract or lease, shall be awarded to one of the parties, the prevailing party, whether he is the party specified in the contract or lease or not, shall be entitled to reasonable attorney's fees in addition to costs and necessary disbursements. *** As used in this section "prevailing party" means the party in whose favor final judgment is rendered." RCW 4.84.330. The relief afforded by the statute cannot be waived. Id.


In California, a non-reciprocal contract clause awarding attorney fees is also made reciprocal as a matter of law. Civil Code 1717 provides in pertinent part that: "In any action on a contract, where the contract specifically provides that attorney's fees and costs, which are incurred to enforce that contract, shall be awarded either to one of the parties or to the prevailing party, then the party who is determined to be the party prevailing on the contract, whether he or she is the party specified in the contract or not, shall be entitled to reasonable attorney's fees in addition to other costs." CC 1717.


It should be noted, however, that in both jurisdictions any clause awarding attorney fees and costs may by its terms pertain to only certain aspects of a given contract and hence the clause may not be applied at all depending on the nature of the parties' dispute. See e.g. Dragt v. Dragt/DeTray, LLC, 139 Wn.App. 560 (2007); Paul v. Schoellkopf, 128 Cal.App. 4th 147 (2005); ABF Capital Corp. v. GMC Properties, Co., 126 Cal.App.4th 204 (2005).


The enforcement of equity and the promotion of access to the courts are the primary reasons given for the statutory conversion of a non-reciprocal clause awarding attorney fees to a remedy that is reciprocal or mutual in nature.

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