The Importance of Legal Fee Clauses in Health Care and Other Contracts

The Importance of Legal Fee Clauses in Health Care and Other Contracts By Ian R. LifshutzIn any contract, whether it’s an:

  • Employment Agreement
  • Restrictive Covenant Agreement
  • Sale of Practice or Business
  • Lease for a Medical Practice or other Business
  • Consulting Agreement
  • Any Equipment Agreements or other Business Agreements

a very common clause involving disputes or litigation, can often determine the likelihood between costly, expensive, and excessive litigation or being able to resolve an issue quickly with lower costs and minimal aggravation. This clause is a “legal fees” clause.

Typical contracts, especially leases, often carry such clauses that require one party, usually the tenant, employee or other party in a lower bargaining position, to pay all the legal fees of the other party if there is a dispute. This clause can lead to excessive litigation or the potential for abuse and harassment in the form of using the legal system to force a settlement against the party who the clause favors, even when such settlement from the other party is not justified.

This occurs when certain wording of legal fees clauses can lead one party to be more emboldened to bring a lawsuit, since they know that even if they lose the case they still have a chance of being awarded the legal fees they spent pursuing the case since it was contractually agreed to. This is something that should be strongly reviewed since it creates even more of a discrepancy in bargaining power in any dispute between the parties if one should arise, as one party would feel that pursuing litigation would effectively cost them “nothing” since they can recoup legal fees from the other party in any such dispute.

The legal fees clause is something that a party entering into any agreement should be aware of, and should insist that either both parties pay their own legal fees or that the losing party pays the winning party’s legal fees. This arrangement, as opposed to a strict requirement of one party paying the other’s costs, encourages parties to bring only legitimate complaints and disputes that have risen to a level where there is a real financial value in bringing the lawsuit since knowing that if they lose, they could be responsible for the other party’s legal costs and expenses. The more fair and balanced approach where no one pays the other party’s fees or the losing party pays the fees of the prevailing party, helps ensure that it is less likely that either party would bring a claim just for the sake of harassing and annoying the other party to “see what they can get.”

If you have a concern about the status of legal fee payment in your contract or agreement, please give us a call. We would be happy to answer your questions on this topic.

Ian Lifshutz
[email protected]

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