“Costs and Expenses”

The doublet costs and expenses occurs routinely in contracts. Here’s an example selected at random from the SEC’s EDGAR database:

If action is instituted to collect this Note, the Company shall pay all costs and expenses, including, without limitation, reasonable attorneys’ fees and costs, incurred in connection with such action.

Black’s Law Dictionary gives the following definitions for cost and expense:

cost, n. 1. The amount paid or charged for something; price or expenditure. Cf. EXPENSE. 2. (pl.) The charges or fees taxed by the court, such as filing fees, jury fees, courthouse fees, and reporter fees. — Also termed court costs. 3. (pl.) The expenses of litigation, prosecution, or other legal transaction, esp. those allowed in favor of one party against the other. • Some but not all states allow parties to claim attorney’s fees as a litigation cost. — Also termed (in sense 3) litigation costs.

expense, n. An expenditure of money, time, labor, or resources to accomplish a result; esp., a business expenditure chargeable against revenue for a specific period. Cf. COST (1). — expense, vb.

Because costs are a kind of expense, as a matter of logic the doublet costs and expenses is as problematic as trousers and clothing. You can do one of two things: refer instead to court costs, other litigation costs, and any other expenses, or drop costs and use only expenses. In creating the defined term “Losses,” I might incorporate the former approach; when I need to be more succinct, I’d use the latter.

About the author

Ken Adams is the leading authority on how to say clearly whatever you want to say in a contract. He’s author of A Manual of Style for Contract Drafting, and he offers online and in-person training around the world. He’s also chief content officer of LegalSifter, Inc., a company that combines artificial intelligence and expertise to assist with review of contracts.

3 thoughts on ““Costs and Expenses””

  1. These definitions lead me to the opposite conclusion. A cost is theoretical – an amount that has been or could be charged. An expense is actual – an amount that is *in fact* being paid or has been paid. A cost is a price / value and could – but does not necessarily – involve an actual payment occurring or having occurred. By contrast an expense does necessarily involve an actual payment.

    From that it follows that an expense is a subset of cost, not the other way around.

    If it’s in my favor for a pertinent clause to be as broad as possible (e.g., my counterparty’s indemnity), it seems preferable to state both, or if I must choose only one, to choose “cost” as being inclusive of expense.

  2. Currently having this debate on teams with 5 in house counsel. No consensus. Google is all over the place. The challenge is that both seem to have the same meaning in litigation (thus the challenge set forth above by Ken), but my worry is that in a commercial dispute there are internal costs related to the underlying matter which are not related to cover, but spring from the breach/tort claimed.

    For what it’s worth I preface it with “out of pocket”, which solves my worry but leaves the issue of the intent of the parties in using both. The problem is it’s so common if you remove one the average buyer counsel will suspect you are trying to pull a fast one.

    Ken how about “Out of pocket costs/expenses” the / indicating they are interchangeable?

    (p.s. I see you chringing from here about my use of /)


Leave a Comment

This site uses Akismet to reduce spam. Learn how your comment data is processed.