One of the biggest mistakes I see small business owners make is using contracts with their customers that do not include a prevailing party attorney’s fees provision. This automatically puts them in a more vulnerable position with someone who, for whatever reason, decides not to pay for their work.
Imagine you complete the work, send your invoice, and the customer simply refuses to pay. Maybe they owe you $8,000, $15,000, or even $30,000. You have a valid breach of contract claim, but hiring an attorney may cost nearly as much as the amount in dispute or even more and make the whole legal process simply not worth it financially.
A well-drafted attorney’s fees clause can change that calculation. If your contract contains a prevailing party attorney’s fees provision, the party that wins the lawsuit may recover reasonable attorney’s fees from the losing party. While this doesn’t gurantee that you will recover what’s owed to you for other reasons, this significantly increases the financial risk for the other side who refuses to pay a legitimate invoice. Instead of facing only the unpaid balance, the customer may also face tens of thousands of dollars in attorney’s fees if they lose on top of whatever they owe you.
This additional leverage often encourages earlier settlement—or payment before litigation is even filed.
Attorney’s fees provisions can be especially valuable for:
- Construction contractors and subcontractors seeking payment for completed work.
- Remodelers, electricians, plumbers, roofers, and HVAC contractors.
- Architects, engineers, and designers.
- Marketing agencies and advertising consultants.
- Software developers and IT consultants.
- Accountants and bookkeepers.
- Business consultants and management advisors.
- Graphic designers and photographers.
- Commercial cleaning companies.
- Landscapers and property maintenance companies.
In each of these situations, the customer may withhold payment while assuming that the business owner will not spend thousands of dollars pursuing a relatively modest claim.
The following is an example of a simple prevailing party attorney’s fees provision:
Attorney’s Fees. In any action, arbitration, or proceeding arising out of or relating to this Agreement, the prevailing party shall be entitled to recover its reasonable attorney’s fees, costs, and expenses, in addition to any other relief to which it may be entitled.
Depending on the nature of your business and your dispute resolution provisions, the language should be tailored to fit your specific contract.