Litigation can be expensive. A question that undoubtedly comes up when discussing litigation is whether attorney's fees incurred in pursuing or defending litigation are recoverable. The default rule in most jurisdictions is that attorney's fees are generally not recoverable. Most jurisdictions follow what’s referred to as the 'American Rule,' which provides that each party is responsible for its own attorney's fees and the prevailing party is not entitled to recover its attorney's fees as part of the damages awarded in litigation.
There are exceptions to the American Rule. A narrow exceptions is though certain statutes and theories of recovery that allow for the recovery of fees. For example, Delaware statutes provide that attorney's fees may be recoverable where a general contractor withholds certain payments held in trust for a subcontractor without good cause. Additionally, parties may choose to bypass the American Rule by including specific language in their contract that provides for the recovery of attorney's fees incurred for disputes that arise out of the contract. Under any exception, an award of attorney's fees will likely be subject to a reasonableness review by the Court.
Contractors should be aware of the American Rule regarding recovery of attorney's fees and include appropriate language in their forms of contract.