Chapter 18 - § 18.2 • ATTORNEY FEES UNDER CONTRACT

• Jurisdiction: Colorado

§ 18.2 • ATTORNEY FEES UNDER CONTRACT

One way to provide for the award of attorney fees is through contract. Courts interpret attorney fee clauses as any other contractual provision. For a party to obtain attorney fees due to a contract, the provision assigning attorney fees must be unambiguous.

The standard Colorado real estate contract¹¹ contains provisions awarding attorney fees to the prevailing party in litigation or arbitration relating to the contract. The Colorado Court of Appeals, in Lasher v. Paxton,¹² stated that the attorney fee provisions could relate to future obligations such as the performance of the assumption agreement.¹³ The court therefore ruled that merger did not extinguish the attorney fee provision upon the delivery of the deed because that provision did not relate to title, quantity, possession, or emblements of the land.¹⁴ The Colorado Court of Appeals subsequently decided two more cases on the same issue, and held in both that the fee-shifting provision in the real estate contract survives the closing and is enforceable in litigation between the buyer and the seller post-closing.¹⁵ In Gattis v. McNutt,¹⁶ the Colorado Court of Appeals had no problem awarding attorney fees to a buyer in litigation with the seller over latent defects in a residential property. The litigation in this case took place years after the closing.

Procedurally,

if attorney fees are simply the consequence of a contractual agreement to shift fees to a prevailing party, they are to be treated as costs and not damages, at least where the fee-shifting contract provision is not the subject of the dispute between the parties and the contract itself is proven to exist. It is within the sound discretion of the trial court to defer consideration of the claim for fees, and the amount of such fees, until after the merits of the case are decided.¹⁷

If the language of a contract provision regarding recovery of attorney fees is permissive, such as if it uses the word "may," then the award of attorney fees is not mandatory but is within the discretion of the trial court.¹⁸ If a contract provision states that a prevailing party "is entitled" to seek an award of attorney fees in any litigation that arises under an agreement, the provision provides the prevailing party with the grounds for seeking an award of attorney fees, but a court can use its discretion when determining whether to award attorney fees.¹⁹ According to Grynberg v. Agri Tech, Inc., if a party wants to...