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In business disputes, each party usually pays its own legal fees

| Aug 26, 2014 | Business Contracts & Disputes |

Many people are surprised to learn that they must pay their own legal fees in a litigation case. That is the general rule in business disputes in the United States, including in North Carolina, under what is known as the American Rule. The English Rule, existing in Great Britain, says that the loser pays the legal fees. Of course, as in anything else, there are exceptions to the rule.

One of the main exceptions to the general rule is where the parties have stated in a private contract that the loser will pay the other’s legal fees. This often appears in so-called contracts of adhesion, one-sided agreements, where the stronger side imposes the rule on the weaker party to the contract. Thus, if a landlord has to take action to collect back rent, the tenant may be ordered to pay costs and legal fees to the landlord in addition to the back rent.

Many other contracts that are not quite even-handed will put the legal fee onus on the weaker party. Those agreements may be silent about who pays if the weaker party wins. One major area where legal fees are the responsibility of the losing party is found in state and federal statutory provisions. Civil rights statutes and many kinds of consumer and regulatory provisions provide for reimbursement of legal fees to the winner. However, these are usually awarded upon a request to the court, and the court retains the discretion over whether to award legal fees or not.

In business contracts executed in North Carolina and other states, a party who signs one without counsel may be surprised to later discover that one side is responsible for the other’s legal fees in enumerated instances. Thus, having representation in the negotiation and drafting of important business agreements may avoid problems in the future. Nonetheless, the general rule in many situations remains that in business disputes and civil litigation each party must pay its own legal fees.

Source: Rapid City Journal, “FORUM: Who pays the attorney fees in civil lawsuits?“, Roger Baron, Aug. 23, 2014

Source: Rapid City Journal, “FORUM: Who pays the attorney fees in civil lawsuits?“, Roger Baron, Aug. 23, 2014

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