Are Attorneys’ Fees Available as Contract Damages? (CCP § 3300)

Underwood-Blog-Images-5-300x300Attorney’s fees are those fees owed by a client to an attorney who performed legal services on behalf of the client. In some cases, a court may order the losing party to pay the attorney’s fees of the other party. Whether attorney’s fees are available as damages depends on the nature of the action. In cases involving a breach of contract, whether attorney’s fees are available generally depends on the terms of the contract. 

What is a Breach of Contract?

A breached contract occurs when a party fails to fully perform its obligations under a valid contract. Generally, to prove a breach of contract, a litigant must prove that a valid contract existed and that the valid contract was breached by the party in some way, causing damages to the litigant.

The Code of Civil Procedure section 3300 provides for the damages available in a breach of contract case. Under section 3300, the measure of damages for the breach of an obligation arising from the contract, except where otherwise expressly provided by this Code, is the amount that will compensate the party aggrieved for all the detriment proximately caused thereby, or which, in the ordinary course of things, would be likely to result therefrom. (CCP § 3300.) At Underwood Law Firm, our attorneys are more than familiar with breach of contract actions and the step-by-step process of pursuing a breach of contract claim. 

What Damages are Generally Available in a Breach of Contract Case?

Generally, California places damages for a breach of contract in two different categories, general damages, and special damages. General damages are those damages that flow directly and necessarily from the breach of contract itself. (Schellinger Brothers v. Cotter (2016) 2 Cal.App.5th 984, 1010 [207 Cal.Rptr.3d 82, 104, 2 Cal.App.5th 984, 1010].) In turn, special damages are those damages that are not a direct result of the breach. (Id.) 

For example, “Hannah” and “Nathan” are business partners who bought several properties with the intent of renovating them and selling them at a higher price. Hannah and Nathan entered into a contract for their house flipping business. Hannah and Nathan also opened a bank account for the business consisting of equal shares of their own money to fund the business. Initially, Hannah and Nathan purchased seven homes to flip; however, without telling Hannah, Nathan bought an eighth house using the funds in the bank account. On his own, Nathan renovated the house using the funds in the bank account and sold the house to “Mia.” After a few months, Hannah noticed that there were funds missing from their shared bank account and eventually found out about the eighth house. Hannah then sued Nathan for a breach of contract. Hannah’s general damages would be her share of the money expended from the bank account. Hannah’s special damages are the lost profits she would have received had she been a part of the renovation and sale of the eighth house.  

Are Attorney’s Fees Available in a Breach of Contract Action? 

Generally, in California, each party to a lawsuit must pay their own attorney fees incurred in a lawsuit. (Copenbarger v. Morris Cerullo World Evangelism (2018) 29 Cal.App.5th 10-11.) In a breach of contract action, a litigant may recover attorney’s fees depending on the terms of the contract. Under Code of Civil Procedure, section 1717, subdivision (a), in any action on a contract, where the contract specifically provides that attorney’s fees and costs, which are incurred to enforce that contract, shall be awarded either to one of the parties or to the prevailing party, then the party who is determined to be the party prevailing on the contract, whether he or she is the party specified in the contract or not, shall be entitled to reasonable attorney’s fees in addition to other costs. (CCP § 1717(a).) Further, under the Code of Civil Procedure, section 1021 provides “[e]xcept as attorney’s fees are specifically provided for by statute, the measure and mode of compensation of attorneys and counselors at law is left to the agreement, express or implied, of the parties; but parties to actions or proceedings are entitled to their costs, as hereinafter provided. (CCP § 1021.) 

In Copenbarger, a sublessee’s lender sued the sublessor for declaratory relief and the breach of a settlement agreement, seeking attorney fees incurred from the date of the settlement agreement to the date the sublessor dismissed the action as damages. (Copenbarger, 29 Cal.App.5th 10-11.)  The trial court granted the sublessee lender attorney fees as damages after finding that the sublessor did breach the settlement agreement. (Id.) The Court of Appeals reversed the trial court’s holding. (Id.) The Court reasoned that although attorney fees are available in a breach of contract action, there is a difference between those attorney fees sought as damages and those attorney fees sought as costs of suit. (Id.

Attorney fees sought as damages are recoverable when they are proximately caused by the breach of contract, as opposed to attorney fees sought as costs of suit. (Id.) As such, the sublessee lender’s attorney fees incurred in the lawsuit for the breach of the settlement agreement are, as the Court stated, costs of the suit because they were incurred in the litigation in which they were sought. (Id.) 

How Can the Attorneys at Underwood Law Assist You?

For a party to prevail on a breach of contract claim, the party must establish that a breach of a valid contract occurred. Once a breach of a valid contract has been proven, the damages a litigant is entitled to depend on the nature of the case. Generally, a party in a breach of contract action is entitled to compensatory damages. However, if provided for in the contract itself, a party may recover attorney’s fees in a breach of contract action. 

As each case is unique, litigants would be well-served to seek experienced counsel familiar with the ins and outs of a breach of contract and the law surrounding it. At Underwood Law, our knowledgeable attorneys are here to help. If you are attempting to assert a breach of contract claim, are worried about your ability to get attorney’s fees in a breach of contract action, or if you just have questions, please do not hesitate to contact our office. 

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