Are Attorneys’ Fees Spent on Litigating Business Contract Disputes Recoverable in North Carolina?

Traditionally, parties to a business contract dispute were unable to recover their attorneys’ fees, even if the parties agreed otherwise, because no North Carolina law specifically allowed for the recovery of attorneys’ fees.  The law dramatically shifted when, in 2011, the North Carolina legislature passed a new law (N.C.G.S. § 6-21.6) that hands businesses a powerful tool that now allows courts to enforce a reciprocal attorneys’ fees provision in business contracts (meaning each party could recover attorneys’ fees).  If the proper contract language is used, a judge or the arbitrator can now decide whether to award attorneys’ fees, and the amount of fees to award.

A business contract with an enforceable attorneys’ fees clause will affect whether and how a contract dispute is resolved.  For example, a plaintiff who with a weak case runs the risk of not only losing the case but paying the defendants’ attorneys’ fees as well as its own. Therefore, depending on the relative merits of each claim and defense, the new law may encourage some plaintiffs to file suit, may deter other plaintiffs from suing, and may put pressure on some defendants to settle early on to limit their exposure.

Form business contracts and new business contracts should be evaluated and drafted with this new law in mind to either limit exposure or create greater leverage for resolving disputes that may arise.  The law can be used for contracts between businesses for services, for the sale or lease of goods (products and equipment), commercial real estate contracts and leases, construction contracts, asset purchase agreements, stock agreements, corporate shareholder agreements and operating agreements for limited liability companies.  Certain types of contracts are excluded, such as consumer contracts (involving individuals which are entered into for personal, family and household purposes), employment contracts and contracts made with the State or any State agency.

For more information, please contact the attorneys at Skufca Law at 704-376-3030.

Skufca Law publishes newsletters periodically as a service to clients and friends.  The purpose of this newsletter is to provide general information about legal issues and developments. Readers should be aware that the facts may vary from one situation to another, so the conclusions stated herein may not be applicable to the reader’s particular circumstances.

Scroll to Top