Definition
This clause requires the losing party to pay the winning party's attorney fees in disputes, creating incentive to settle rather than litigate and deter frivolous claims.
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Attorney fees clauses shift costs: prevailing party's attorney fees are paid by losing party. Without clause, each party pays own attorney (even if they win). With clause, losing party pays winner's fees, creating strong incentive to avoid litigation. Attorney fees clauses are common in: commercial real estate, construction contracts, property management, HOA disputes. Residential purchase contracts less frequently include attorney fees (varies by state/custom). Attorney fees clauses are typically unilateral (favoring one party): 'If seller breaches, buyer's attorney fees are paid by seller' or mutual (either party). Mutual clauses are fairer. Risk: if you lose, you pay both your attorney fees AND opposing counsel's fees (can double legal cost). Attorney fees clauses incentivize settlement (you don't want to pay opposing counsel). Enforceability varies by jurisdiction: some states don't enforce one-way attorney fees clauses. Understanding attorney fees clauses is important: they significantly affect litigation costs and settlement leverage.
Pro Tip
Attorney fees clauses significantly affect litigation calculus. Negotiate for mutual clauses.
Example
Contract includes: 'Prevailing party in dispute is entitled to reasonable attorney fees paid by losing party.' If you sue and win, seller pays your attorney; if you lose, you pay seller's attorney.