A California real estate agent drafts a purchase agreement that includes a clause stating: 'In the event of a dispute, the prevailing party shall be entitled to reasonable attorney's fees.' The agent is later asked whether this clause is standard in California residential real estate transactions. Under California law, what is the MOST accurate response?
Correct Answer
A) If a contract includes an attorney's fees clause, California Civil Code §1717 makes it reciprocal, allowing either party to recover fees if they prevail
Under California Civil Code §1717, when a contract contains an attorney's fees provision, it is deemed reciprocal by operation of law. This means that even if the clause is drafted to benefit only one party, the prevailing party in any contract dispute is entitled to reasonable attorney's fees. The CAR RPA includes such a provision.
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