Each party shall pay its own costs and expenses incurred in connection with the negotiation, preparation, and execution of this Agreement and any documents referred to in it.
Here is a plain English explanation of the suggested Expenses clause:
This clause states that each party to the contract will pay their own costs and expenses related to creating and signing the contract and any other documents mentioned in the contract.
In other words, neither party can make the other party pay for any costs or expenses they incurred while negotiating, drafting, or signing the contract and related documents. Each party is responsible for covering their own costs.
The purpose of this clause is to make clear that neither party can try to bill or charge the other party for any expenses related to the process of making the contract.
This avoids potential confusion or disputes over who should pay for what.
The practice of each party bearing their own costs and expenses in negotiating and drafting contracts has longstanding origins in English common law.
In the absence of agreement to the contrary, the default position was that each side paid their own lawyers, consultants, and other advisors involved in the contract process. This aligned with the broader notion in common law that parties should be responsible for expenses they voluntarily incur.
Over time, contract drafters began expressly stating this default position in written expense allocation clauses to avoid any possible ambiguity. By clearly spelling out that each party covers their own costs, drafters sought to preempt arguments over whether one side should reimburse the other for contract-related expenses. The inclusion of expense clauses became increasingly common in the 19th and 20th centuries as written contracts grew more prevalent across business and legal contexts in England and Wales.
Today, clear expense allocation clauses enumerating each party's responsibility for their own costs are considered a standard provision in many common law contracts.
Their origins trace back to the basic common law principle that parties are accountable for expenses they voluntarily take on, now codified into contractual text to prevent confusion and disputes down the road.