News & Noteworthy

Authored - NJ Contract Law Update - Practical Limitation on Contractual Attorneys Fees
MAY 24, 2013 | Windels Marx - Commercial Litigation

In G. Winter's Sailing Center ("GWSC") v. Bennett, 2013 WL 1704943 (N.J.App.Div. April 22, 2013), the Court--in addition to finding no support for the assertion that the full contract was not presented to defendant when he signed it--instructively reminded potential plaintiffs that even though reasonable attorneys fees may, in the abstract, exceed the principal amount sought (for any number of reasons, including the size of the claim; the scope of minimum attorney tasks needed to go to judgment and beyond; standard hourly rates in our area; and/or strong or even irrational resistance by defendants), judges sometimes do not wish to award "more in counsel fees than the [party is]...owed for the services it provided to defendant."

Certainly, there is a minimum number of hours needed to complete a litigation process; and as a corporate creditor, counsel is mandatory, unless a decision is made to proceed only in Special Civil Part where the jurisdictional limit is $3,000. Thus, GWSC would have had to limit its recovery to $3,000 to proceed in Special Civil Part1, see R. 6:1-2 (a)(2); but counsel is not required, see R. 6:11.

The moral of the story is that clients should not necessarily expect a contractual legal-fee provision to make them whole; rather, it may simply limit their losses. The cost of litigating a small case may thus be painful--especially unless a contingency-fee arrangement can be made (which is sometimes problematic with small collection matters and an isolated representation, though a 'fit' can often be found). Also, if the amount at issue is closer to $3,000, a plaintiff in GWSC's position should seriously consider limiting recovery to $3,000 in order to 'fit' Small Claims and thus avoid the cost of counsel--especially knowing that as a practical matter, the full amount of attorneys fees might not be recoverable.

Contact & Legal Disclaimer

Clark Alpert is the author of Guide to New Jersey Contract Law, published by the New Jersey Institute for Continuing Legal Education, originally published in 2007 and updated in November 2011. His updates on New Jersey contract law are based in recent issues and practical methods for addressing similar situations in your practice or business. They are not intended to serve as legal advice. Clark welcomes your questions and comments.

1 Certain tenancy security deposit claims can be heard in Small Claims up to $5,000; id.

Windels Marx helps you harness opportunity and mitigate risk with a team that provides your business with the service, quality and value essential to a trusted relationship.