STEELE, Chief Justice:

In this reformation action concerning cash flow distributions in three real estate joint venture agreements, we hold that the Vice Chancellor properly reformed the agreements on the basis of unilateral mistake and knowing silence by the other party. Negligence in discovering an alleged mistake does not bar a reformation claim unless the negligence is so significant that it amounts to a failure to act in good faith and in accordance with reasonable standards of fair dealing. Ratifying a contract does not create an equitable bar to reformation unless the ratifying party had actual knowledge of the mistake giving rise to the reformation claim. We reverse the Vice Chancellor's fee award because a contractual fee-shifting provision incorporating the words "incurred" and "reimburse" does not apply where counsel for the party seeking fees represented the party free of charge to avoid a malpractice claim. We also clarify that 10 Del. C. § 5106's reference to "costs" does not include attorneys' fees.

I. FACTUAL AND PROCEDURAL HISTORY1

Rob and Eric Bronstein2 cofounded (and remain principals of) The Scion Group, LLC.3 ASB Capital Management, LLC, is the registered investment adviser for approximately 150 pension funds (ASB or the Funds). Between January 2007 and January 2008, ASB-advised pension funds4 entered into five joint ventures for the ownership, operation, and development of student housing projects through special purpose entities.5 Keyvan Arjomand, Scion's primary contact at ASB, negotiated the agreements with Rob. ASB's president, Robert Bellinger, actively oversaw the negotiations and personally approved each venture. ASB's Real Estate Investment Advisory Committee also approved the investments based on internal memorandums.

Rob testified that he left the "wordsmithing" of the agreements to Eric. ASB relied on DLA Piper LLP as outside counsel. DLA Piper partner Barbara Trachtenberg drafted and negotiated the first joint venture agreement, the University Crossing project. After that, she ceded most of the drafting responsibility to Cara Nelson, a junior associate who only had been working on real estate joint venture deals for a few months.

Real estate joint venture projects generally follow a basic framework: a promoter provides the bulk of the capital and a sponsor arranges the deal and manages the property.6 ASB served as the promoter in each of the five ASB-Scion joint ventures, providing at least 99% of the capital and retaining at least 99% of the equity. Scion served as the sponsor and invested no more than 1% of the capital. Scion earned a management fee for overseeing the project's day-to-day operations, as well as a leasing fee and an acquisition fee. Scion primarily earned its compensation, however, through an incentive payment known as a "promote."7

Generally, a promote is triggered once the project generates a specified preferred return on the invested capital. Once the project achieves the specified preferred return, the promote rewards the sponsor with a greater proportion of the project's profits.8 Real estate professionals commonly discuss promotes using industry shorthand, in which they describe the economics as "an X over a Y."9 For example, the phrase "20% over an 8%" means the sponsor would receive 20% of incremental profits after the project generated an 8% preferred return.

The Vice Chancellor found that Arjomand and Rob negotiated Scion's compensation using industry shorthand. In an October 2, 2006 email, Arjomand proposed a "20% above an 8% preferred return;" Rob replied the next day that he was "probably okay with the promote structure." Neither side questioned the shorthand's meaning or sought to clarify whether Scion would get its promote before ASB recovered its initial capital investment.

The parties' first joint venture, the University Crossing LLC Agreement, incorporated the promote and preferred return terms Rob and Arjomand discussed into the Sales Proceeds Waterfall, which provided, in relevant part:

The LLC Agreement defined the Promote Percentage and the Remaining Percentage as 20% and 80%, respectively. In effect, the Waterfall provided that the parties would receive distributions in proportion to their respective percentage equity investments, approximately 99% for ASB and 1% for Scion, until each member received an amount equal to an 8% preferred return on that investment. Therefore, distributions would continue at a 99:1 ratio until each member recovered its initial capital investment. Only after ASB recovered its investment would Scion receive a promote payment equal to 20% of the excess profits, with ASB and Scion splitting the remaining 80% according to their 99:1 equity ratio.

The parties' second joint venture, Millennium Bloomington Apartments, LLC, mirrored the University Crossing terms. Scion had asked for higher acquisition and management fees on the Millennium deal, but ASB had refused. Rob continued to seek greater compensation for Scion, discussing a two-tier promote structure in the context of a proposed project that the parties ultimately abandoned.10 Discussions continued, however, and in a March 20, 2007 email, Arjomand told Rob that Bellinger wished to structure deals with lower fees but a higher promote that would incentivize the sponsor to earn greater compensation through successful property management. Rob responded that he understood and was open to reducing his fees in exchange for greater promote compensation.

The parties continued to negotiate a trade-off between fees and promote consideration. In May 2007, Arjomand sent an email titled "ASB/Scion General Deal Parameters Going Forward," which summarized the deal structure that he believed both sides had finally negotiated: "Promote — On an unlevered deal, 20% over an 8%, and 35% over a 12%. On a levered deal, 20% over a 9%, and 35% over a 15%" (the May 2007 Terms). Rob replied the next day stating that he "agree[d] with all this." Arjomand forwarded these terms to the entire deal team on May 22, describing them as "the basic economics of our deal format with Scion on a go forward basis."

The parties entered into their third joint venture, Breckenridge, LLC, in June 2007. DLA Piper used the Millennium LLC Agreement as a template and made deal-specific adjustments to prepare the initial draft of the Breckenridge LLC Agreement. Nelson circulated the first draft on June 14, 2007. Although DLA Piper revised both the operational cash flow waterfall and the Sale Proceeds Waterfall to add the second tier of preferred return, the waterfalls only included one level of promote. Eric replied the same day and identified the problem. The Vice Chancellor found that Eric did not intend in his email to alter the economic terms for the Sale Proceeds Waterfall but rather to memorialize accurately the two-tier promote structure to which Rob and Arjomand had agreed.

Nelson revised the Waterfall provisions, but her June 15, 2007 draft of the LLC Agreement placed the missing first-tier promote after the first preferred return provision, but before the return of capital provision in the Waterfall.11 This placement meant that Scion would begin to earn its promote immediately after the project satisfied its first preferred return amount but before the parties recovered their initial capital investment. Despite these significant consequences, no one commented on the change.

Eric testified that he reviewed the Waterfall in detail. The Vice Chancellor found that Eric realized that the first-tier promote appeared before the return of capital and understood that Scion would benefit from this error.12 Trachtenberg could not recall whether she read the drafts before Nelson circulated them, but if she did, she must not have focused on the Waterfall because "it's just wrong. It's a terrible translation of the [May 2007 Terms]."13 Nelson conceded that she did not have the experience to understand the Waterfall provisions at the time and only learned of the mistake when Trachtenberg explained it to her in the fall of 2010.

After one minor change,14 the parties executed the Breckenridge deal agreement with the following relevant parts of the Sale Proceeds Waterfall:

The Vice Chancellor found through clear and convincing evidence that the parties had erroneously placed the third paragraph's distribution before the fourth's distribution. That error caused the first-tier promote to fall before the return of the members' invested capital (and leaves the "; and" out of place). Reversing the distributions in those two paragraphs would reflect the May 2007 Terms and resolve the "; and" issue. The ASB Investment Committee approved the deal based on an internal memorandum describing the Waterfall as consistent with the May 2007 Terms. Bellinger testified that he reviewed parts of the Breckenridge LLC Agreement before approving it, but he admitted that he failed to read carefully the Agreement.

The parties then entered into their fourth joint venture, the 2040 Lofts, LLC, project. Nelson drafted the agreement by electronically copying the Breckenridge LLC Agreement and making deal-specific changes. The only changes to the Sale Proceeds Waterfall were to replace the word "First" with "8%" in two places and the word "Second" with "12%" in one place.16 Neither ASB nor Scion reviewed the Sale Proceeds Waterfall in any meaningful respect. The ASB Investment Committee again approved the Agreement based on an internal memorandum that described the Waterfall as consistent with the May 2007 Terms. In the 2040 Lofts LLC Agreement, however, the promote provision again appeared before the return of capital provision, the same error as in the Breckenridge LLC Agreement. Neither Bellinger nor Trachtenberg carefully read the 2040 Lofts LLC Agreement before approving the deal or when ASB later transferred the interest.17

Finally, the parties entered into their fifth joint venture, Dwight Lofts, LLC. Nelson again electronically copied the Breckenridge LLC Agreement and made deal-specific changes. She only edited the Sales Proceeds Waterfall to replace "Fund" with "Fund Member." Once again, the Dwight Lofts LLC Agreement incorrectly placed the first-tier promote ahead of the return of capital and no one at DLA Piper or ASB caught the error.

Effective March 3, 2008, ASB (on behalf of Dwight Lofts Holdings, LLC (DLH), a group of ASB's clients) and Scion amended the Agreement to modify a put provision. The amendment included a ratification provision which stated: "Except as set forth herein, the terms and provisions of the [Dwight Lofts LLC Agreement] are hereby ratified and confirmed and shall remain in full force and effect." Nothing in the Dwight Amendment changed the Sale Proceeds Waterfall, and only Scion knew of the error at that time.

Between their fourth and fifth joint ventures, the parties entered into the Automatic Lofts deal. For tax reasons, the parties did not structure the deal as a joint venture. Instead, Scion served as the property manager and loan servicer, and the parties structured Scion's compensation so as to mimic Scion's joint venture compensation under the May 2007 Terms. Trachtenberg engaged in significant drafting and negotiation for this project. Arjomand initially explained to Rob that Scion's incentive management fee would mimic the Scion — ASB promote structure for a levered deal, but, after further negotiation, the parties agreed to use the unlevered percentages. Ultimately, the Incentive Management Agreement employed an internal rate of return formulation which necessarily required that Scion earn a promote only after the return of invested capital. When he reviewed the Automatic Lofts agreement, Eric accepted the placement of the return of capital before the first-tier promote without comment. The Vice Chancellor found that the Bronstein brothers accepted the IRR formulation in the Automatic Lofts deal because they knew that it was correct18 and that the different Sale Proceeds Waterfalls in the Breckenridge and 2040 Lofts LLC Agreements were incorrect.19

On June 12, 2010, Scion exercised its put right in the 2040 Lofts LLC Agreement. ASB had contributed $47.3 million in capital; Scion had invested $479,000. The parties agreed the venture was underwater, with a fair market value of $35.5 million. On August 30, 2010, Eric informed ASB that the put's purchase price was $1.83 million, including an approximately $1.5 million promote (in total representing a 282% gain for Scion and a 30% loss for ASB). Without the promote, Scion's buyout price would have been only $347,792.46. The parties would thus have shared the loss proportionately.

Arjomand had left ASB before Scion exercised the put, and James Darcey replaced him. Less than half an hour after receiving Eric's purchase price calculation, Darcey responded: "I'm confused. Does your calculation suggest that Venture Partner (Scion) is due $1.8 million? It seems odd to me that an investment into which we together invested over $47 million and which is now valued at $35.5 million would generate a promote." Eric invoked the Sales Proceeds Waterfall to defend his calculation. After receiving Eric's response, Darcey emailed Rob to ask if the 2040 Lofts venture differed from the University Crossing deal. Rob explained in an email four reasons why the economic structure differed when he responded to Darcey; at trial, however, Rob admitted virtually every statement in the email was false.

After these emails, Darcey and Bellinger examined the agreements and identified the scrivener's error. Bellinger called DLA Piper and "had a very, very tough conversation;" he was "incredibly upset that this had happened because it was clear what the document said, and that it was just wrong." ASB then put DLA Piper on notice of a malpractice claim.

On July 22, 2010, Scion exercised its put right under the Dwight Lofts LLC Agreement, claiming a $3.38 million purchase price, which included an approximately $2.6 million promote. ASB contends that Scion is due only $1.26 million. Under the LLC Agreement, ASB contributed approximately $78.5 million and Scion contributed approximately $790,000.

In a September 20, 2010 letter, ASB notified Scion that unless Scion agreed to correct the Breckenridge, 2040 Lofts, and Dwight Lofts LLC Agreements (collectively, the Disputed Agreements) by the close of business on September 21, 2010, ASB would file suit. The next day, Scion preemptively filed a lawsuit in the United States District Court for the Eastern District of Wisconsin, regarding only the 2040 Lofts venture.20 On September 22, 2010, ASB filed suit in the Court of Chancery seeking an order reforming the Sale Proceeds Waterfalls in all three of the Disputed Agreements to comport with the May 2007 Terms. DLA Piper represented ASB in this action free of charge. Scion counterclaimed to enforce the agreements as written. Both sides invoked a contractual fee-shifting provision detailed in the discussion of attorneys' fees infra.

The Court of Chancery action proceeded to trial.21 The Vice Chancellor reformed the Disputed Agreements in favor of ASB and awarded ASB over $3.2 million in attorneys' fees based on the contractual fee-shifting provisions. Scion alleges the Vice Chancellor erred because: (1) he failed to recognize that failure to read a contract bars a claim for equitable reformation; (2) he misapplied Delaware law when he granted reformation based on unilateral mistake in the absence of finding concealment, trickery, or a duty to speak; (3) he misapplied Delaware law when he ruled that a ratifying party must have actual knowledge of the mistake for ratification to bar reformation; and (4) he erroneously awarded ASB attorneys' fees because he failed to interpret the parties' contractual fee-shifting provisions consistently with the contracts' plain language.

II. STANDARD OF REVIEW

We review the Vice Chancellor's legal conclusions de novo,22 but we defer to the Vice Chancellor's factual findings unless they are clearly erroneous.23 While we review an award of attorneys' fees for abuse of discretion,24 we review the Vice Chancellor's interpretation of a contractual fee-shifting provision de novo.25

III. ANALYSIS

A. ASB's Alleged Negligence Does Not Bar an Equitable Reformation Claim.

Although the parties selectively parse the Vice Chancellor's opinion to craft their respective narratives, the Vice Chancellor's factual findings are clear and the record supports them. After considering both "Bellinger's testimony and the overall context of the negotiations," the Vice Chancellor found that "Bellinger read the University Crossing [LLC A]greement in its entirety and was familiar with its terms."26 Concerning the Disputed Agreements, the Vice Chancellor found that "Bellinger relied on Trachtenberg and Arjomand to advise him about any changes, brief him on new terms, and provide him with any portions that he needed to read."27 Because the University Crossing LLC Agreement formed the basis for the three Disputed Agreements, the Vice Chancellor concluded that "Bellinger adequately and properly oversaw the negotiation process and was informed about the terms of the joint venture agreements as negotiated by the parties."28 The Vice Chancellor ruled that, even assuming Bellinger read none of the Disputed Agreements, but rather relied on his employees and advisors to inform him of any changes, his failure to read would not bar a reformation claim.29

Scion claims that Delaware law does not support the Vice Chancellor's ruling. We recognize that our case law in this area has been unclear. In Cerberus International, Ltd. v. Apollo Management, L.P., we observed that "[a]ny mistake claim by definition involves a party who has not read, or thought about, the provisions in a contract carefully enough."30 We created some confusion by observing that "[s]ome jurisdictions do say that a degree of fault greater than negligence bars reformation,"31 but clarified that we have "never adopted such a rule" and that we took "no position on whether, under certain circumstances, a party's misconduct could bar a reformation claim."32 It is unclear whether "misconduct" means simple negligence, gross negligence, or something more.33 To resolve the confusion surrounding our use of the word "misconduct," we now adopt the standard in Restatement (Second) of Contracts § 157: for purposes of a reformation claim, "[a] mistaken party's fault in failing to know or discover the facts before making the contract" does not bar a reformation claim "unless his fault amounts to a failure to act in good faith and in accordance with reasonable standards of fair dealing."34 To the extent existing Delaware case law is inconsistent with this standard, we expressly overrule it.35

This standard is limited to reformation claims and does not affect our existing rule in cases that a failure to read bars a party from seeking to avoid or rescind a contract.36 Avoidance and reformation are fundamentally different remedies. Avoiding or rescinding37 a contract essentially "results in [the] abrogation or `unmaking' of an agreement, and attempts to return the parties to the status quo [ante]."38 In contrast, reformation does not "unmake" an agreement; it corrects an enforceable agreement's written embodiment to "reflect the parties' true agreement."39 We adhere to our case law holding that a party cannot seek avoidance of a contract he never read.40 In contrast, we will permit a party to seek reformation of a written agreement that incorrectly transcribes the parties' agreement, so long as the party's conduct does not amount to a failure to act in good faith and in accordance with reasonable standards of fair dealing.

Applying that standard, we hold that even assuming Bellinger did not read the Disputed Agreements, he acted in good faith and in accordance with reasonable standards of fair dealing.41 The record supports the Vice Chancellor's factual finding that Bellinger read the University Crossing LLC Agreement and then relied on his employees and advisors to alert him to any significant changes in the later agreements. The Vice Chancellor found that Bellinger's advisors informed him about the terms of the joint venture agreements as ASB and Scion had negotiated them. The Vice Chancellor correctly concluded that we do not "require that a senior decision-maker like Bellinger read" every word of every agreement.42 Because the record supports the Vice Chancellor's factual findings, and these findings indicate that Bellinger's actions comported with reasonable standards of fair dealing, we hold that Bellinger's failure to read the Disputed Agreements does not bar ASB from seeking to reform those agreements.

B. The Vice Chancellor Correctly Stated the Law of Reformation Based on Unilateral Mistake

Scion next argues the Vice Chancellor erred when he granted reformation because "simply proving a unilateral mistake by one party with knowing silence by another is insufficient to support the extraordinary remedy of equitable reformation."43 ASB argues that Scion failed to fairly present this argument to the Vice Chancellor and thereby waived it on appeal.44 "We `adhere to the well settled rule which precludes a party from attacking a judgment on a theory'" he failed to advance before the trial judge.45 Under Supreme Court Rule 8, a party may not raise new arguments on appeal.46

Here, Scion failed to "fairly present" this argument to the Vice Chancellor because, in its posttrial briefing, Scion repeatedly cited Cerberus International, Ltd. v. Apollo Management, L.P. for the proposition that a party seeking reformation based on unilateral mistake "`must show that it was mistaken and that the other party knew of the mistake but remained silent.'"47 Scion quoted Emmert v. Prade to argue that reformation based on unilateral mistake occurs in "exceptional cases," but it did not elaborate on the meaning of "exceptional."48 In light of Scion's repeated references in its posttrial briefing to Cerberus's standard, Scion did not fairly present its current theory that Delaware law requires "something more" to the Vice Chancellor.

Because Scion did not fairly present this argument to the Vice Chancellor, we may consider the issue only if the interests of justice require us to do so.49 One factor in this analysis is whether an issue is outcome-determinative with "significant implications for future cases."50 Scion has raised contradictory case law concerning whether reformation is available at all in a unilateral mistake case,51 or whether reformation based on unilateral mistake is available, but only in "exceptional" cases.52 The record is clear that Scion did not engage in any fraud or trickery that would have prevented ASB from discovering the drafting error. Because the issue of whether knowing silence is sufficient for reformation is outcome-determinative and because our case law is contradictory,53 we will consider this issue on its merits.

We hold that Cerberus accurately states Delaware law: reformation based on unilateral mistake is available where a party can "show that it was mistaken and that the other party knew of the mistake but remained silent."54 To the extent our cases state otherwise or impose additional requirements, we expressly overrule them.55 Therefore, while Scion did not fairly present this argument to the Vice Chancellor, we hold that the Vice Chancellor properly relied on Cerberus.56

We also address the existing line of Court of Chancery cases permitting reformation based on unilateral mistake only in "exceptional" cases.57 The parties agree that this line of cases originated with a Vice Chancellor's statement in AOC Limited Partnership v. Horsham Corp. that he "may reform a contract only when the contract does not represent the intent of the parties due to fraud, mutual mistake or, in exceptional cases, a unilateral mistake coupled with the other party's knowing silence."58 However, it appears that this articulation misstates our language in Collins v. Burke that we "have always insisted in reformation cases on a showing of mutual mistake or, in appropriate cases, unilateral mistake on plaintiff's part coupled with knowing silence on defendant's part."59 We expressly overrule any decisions requiring that a case be "exceptional," and clarify that what makes a case "appropriate" for reformation based on unilateral mistake is the ability to show, by clear and convincing evidence, that despite the existing written agreement one party maintains is accurate, that existing writing erroneously expresses the parties' true agreement.

C. Ratification of a Contract Properly Subject to Reformation Does Not Bar Reformation Absent Actual Knowledge of the Mistake.

Scion argues that the Vice Chancellor charted "a new direction in the law unsupported by Delaware precedent"60 when he held that "[r]ather than imputed or constructive knowledge, ratification of a contract subject to reformation requires actual knowledge of the error."61 We reject this argument and hold that the Vice Chancellor accurately stated Delaware law.

The Vice Chancellor appropriately noted that "[r]atification requires `[k]nowledge, actual or imputed, of all material facts' and that knowledge `may be implied from conduct, as well as expressed by words.'"62 He also correctly concluded that ratification of a document subject to reformation requires actual knowledge of the mistake. As we commented in Cerberus, a party seeking reformation by definition admits that had he read the document more carefully, he would have noticed and corrected the mistake.63 The Vice Chancellor reasoned that requiring actual knowledge "recognizes that a party otherwise entitled to equitable reformation based on mistake nearly always could have discovered the erroneous provision."64 The problem in these cases arises because "[t]he mistaken party unwittingly believes, however, that the provision is accurate. That is the point of the mistake. Accordingly, ratification does not preclude reformation unless the ratifying party actually knew of the error."65

Several Court of Chancery decisions recognize this distinction. In one, a decision granted a motion to amend a pleading to add reformation claims because nothing in the record allowed an inference that "the circumstances that allegedly constituted... unilateral mistake with ... knowing silence were different by the time of ratification or reaffirmation," and because equity does not sanction "[r]atification or reaffirmation based upon a continuing fraud or misapprehension about the facts."66 Similarly, in Great-West Investors LP v. Thomas H. Lee Partners, L.P., a different member of that court applied an actual knowledge standard when he stated that "[p]roof that ... Great-West knew" of the error when it executed a contract in 2008 "might indicate that Great-West had waived its claims that the [contract] should be reformed based on a 2007 mistaken interpretation of that language."67

We also note that other courts apply a similar distinction. A Southern District of New York bankruptcy judge, interpreting New York law, noted that "[r]atification does not appear to apply to reformation. Ratification involves the loss of the power to avoid an otherwise voidable contract by taking acts inconsistent with disaffirmance. An agreement subject to reformation is not voidable, and cannot be disaffirmed."68 In Louisiana, where "[r]atification requires not only knowledge of the terms of the act involved, but also an express intention to be bound thereby with full knowledge of the facts and recitations contained therein," the Louisiana Court of Appeals barred a defendant in a reformation action from asserting a ratification defense.69 There, the Louisiana court found "not one scintilla of evidence which even remotely suggests [the plaintiff] intended to ratify the" alleged error supporting the reformation claim.70 Similarly, at least four other states agree that "in order to make a ratification effective the party must have ratified the instrument as it was and not as the party thought it was."71

Scion does not appeal the Vice Chancellor's factual finding that ASB's client group, DLH, had no knowledge of the error in the Dwight Lofts LLC Agreement when it signed the Dwight Amendment. Because DLH had no actual knowledge of the error at the time it purportedly ratified the mistake, we affirm the Vice Chancellor's judgment reforming the agreement in favor of DLH.

D. ASB Is Not Entitled to Attorneys' Fees and Costs Under the Contract.

The Vice Chancellor awarded ASB attorneys' fees and costs based on "the contractual fee-shifting provisions in the Disputed Agreements."72 Scion argues the Vice Chancellor erroneously awarded fees based on the contractual provision because ASB never "incurred" fees for which Scion should "reimburse" it and because ASB was not a "prevailing party" in an "action to enforce the contract."73 ASB argues that the Vice Chancellor properly awarded fees under the contract, but if we hold otherwise, we should remand the case so the Vice Chancellor can consider ASB's alternative argument that it is entitled to fees under 10 Del. C. § 5106.74

We hold that ASB did not "incur" fees requiring reimbursement within the plain meaning of the contract and therefore reverse the Vice Chancellor's fee award on that basis.75 We remand for the Vice Chancellor to consider whether a fee award would be appropriate in this case because it meets the terms of one of the limited exceptions to the general rule that a party pays his own fees. We clarify that the Vice Chancellor's power to award fees stems from his inherent equitable authority, not from the statutory power to award costs under 10 Del. C. § 5106.

1. The Contractual Fee Award

The Disputed Agreements contain the following fee-shifting provision: where "`any of the parties to this Agreement undertakes any action to enforce the provisions of this Agreement against any other party, the non-prevailing party shall reimburse the prevailing party for all reasonable costs and expenses incurred in connection with such enforcement, including reasonable attorneys' fees.'"76 We interpret clear and unambiguous contract terms according to their plain meaning.77 The plain meaning of "incurred," combined with "reimburse," does not extend to this situation where ASB did not incur any payment obligation because DLA Piper agreed to represent it without charge.

Black's Law Dictionary defines "incur" as "[t]o suffer or bring on oneself (a liability or expense)."78 "[R]eimburse" means to repay or indemnify.79 ASB did not suffer or bring upon itself a liability or an expense. Similarly, ASB made no payment for which it needed to be repaid or indemnified.

One Court of Chancery decision, O'Brien v. IAC/Interactive Corp., interprets a merger agreement's indemnification provision to determine whether a contingent fee agreement with a success premium fell within the meaning of "incurred."80 The Vice Chancellor in that case ruled that the plaintiff seeking fees "actually incurred the full [amount] because he was obliged to pay that amount to" his attorneys.81 He explained that if the defendant succeeded on appeal, the plaintiff would have to return the money the defendant had already advanced because he would not owe his attorneys, and therefore he would not have incurred those fees.82

Similarly, a Colorado federal district court judge addressed contractual fee award language in both a legal services agreement and promissory notes where the claimant's counsel "provided their services pro bono in the post-settlement litigation regarding enforcement of the attorney's liens."83 Interpreting the plain meaning of "incur" in the legal services agreement,84 the judge held that the claimant "did not `incur' any costs or expenses," despite the claimant's argument that "`incur' does not mean the same as `pay' and the mere fact that counsel did not bill does not mean that [the claimant] did not incur those fees."85 After defining "incur," the judge noted that the claimant "owe[d] no debt and ha[d] no liability for any fees;"86 therefore, "[u]nder the plain and ordinary meaning of the words presented, [the claimant] did not personally incur any costs or expenses, and, hence, did not trigger recovery under the attorneys' fees provision."87

The Colorado federal judge also considered the meaning of the term "reimburse" in the context of the promissory notes at issue in that case:

We find the Colorado federal judge's analysis in this case persuasive. "Reimburse" and "incur" clearly and unambiguously indicate that ASB must have been liable for a payment at some point.89 ASB argues that we should award fees in order to encourage law firms to do "the right thing."90 We disagree. We are not inclined as a policy matter to award fees to ASB, who would pass them presumably on to DLA Piper.91 That would effectively reward DLA Piper for successfully litigating this reformation action to correct its own mistakes.

2. Fee Award Based on 10 Del. C. § 5106

Because we hold ASB is not entitled to fees under the Disputed Agreements' contractual provisions, ASB asks us to remand so that the Vice Chancellor can consider a fee award under 10 Del. C. § 5106.92 Although we cannot remand for the Vice Chancellor to consider a fee award under the statute, we note that when ASB raised this issue, it relied on cases that improperly conflate a Vice Chancellor's inherent equitable power to award fees in a proper case with the statutory authority to award costs 10 Del. C. § 5106 provides. Therefore, although we clarify that a party cannot seek attorneys' fees under 10 Del. C. § 5106, we interpret ASB's request as one encompassing the argument that the Vice Chancellor consider a fee award under his inherent equitable powers.

Section 5106 provides that "[t]he Court of Chancery shall make such order concerning costs in every case as is agreeable to equity."93 "Costs" in this context is a term of art that does not include attorneys' fees. Any contrary precedent, we expressly overrule.94 We have made clear that costs "do not generally include a party's counsel fees."95 Similarly, we draw a distinction between attorneys' fees and costs when determining a judgment's finality: we have consistently held that a judgment is not final until attorneys' fees are awarded, but a judgment is final where only costs remain to be awarded.96

In 1955, a Delaware trial judge "held that the word `costs', as used in ... 10 Del C. § 5106, may not be construed to include counsel fees of the proponent"97 because to hold otherwise would cause an "irreconcilable conflict"98 with our statement in Great American Indemnity Co. v. State that "[i]t is settled that a court may not order the payment of attorneys' fees as a part of the costs to be paid by the losing party unless the payment of such fees is specifically authorized by statute or contract."99 As the trial judge noted, "by common usage and ordinary meaning, the word `costs' does not include counsel fees of a successful litigant and ... there appears to be no acceptable reason for according to the word any meaning broader than that ordinarily given it."100 Similarly, in a recent 2005 opinion, a Vice Chancellor noted that "the term `costs' is routinely limited to court costs and certain other expenses necessarily incurred in the litigation process, but excluding legal fees."101

"It is beyond dispute that litigants in Delaware are generally responsible for paying their own counsel fees," absent special circumstances or a contractual or statutory right to receive fees.102 It is also well established that a Chancellor or Vice Chancellor, "under his equitable powers, has latitude to shift attorneys' fees."103 Circumstances where a Vice Chancellor may use his equitable powers to award fees outside of an express "statutory authorization"104 or a contractual fee-shifting provision include, but are not limited to: (1) the presence of a "common fund created for the benefit of others;"105 (2) where the judge concludes a litigant brought a case in bad faith or through his bad faith conduct increased the litigation's cost;106 and (3) cases in which, although a defendant did not misuse the "litigation process in any way, ... the action giving rise to the suit involved bad faith, fraud, `conduct that was totally unjustified, or the like' and attorney's fees are considered an appropriate part of damages."107 More generally, a Vice Chancellor may award fees in the limited "circumstances of an individual case [that] mandate that the court, in its discretion, assess counsel fees `where equity requires.'"108 Because this power is inherently equitable, even a Superior Court judge in a case sounding in equity may award fees absent contractual or statutory authority.109 This inherent equitable authority to award fees does not arise from the statutory power to award "costs" under 10 Del. C. § 5106, however.

Some decisions improperly conflate the Court of Chancery's inherent equitable power to award fees in a proper case with the statutory authority to award costs where the equities dictate under 10 Del. C. § 5106.110 As one Court of Chancery decision has noted, the cases that have treated attorneys' fees "as coming within 10 Del. C. § 5106" are simply "a restatement of the existing equity rule."111 Although that court cannot award fees as "costs" under Section 5106, the question remains whether ASB is entitled to fees, as an exercise of the Vice Chancellor's inherent equitable powers, based on one of the limited exceptions to the general rule that each party pays his own fees.112 We remand the case to the Vice Chancellor to consider that question.

E. Attorneys' Fees on Appeal

In its Answering Brief, ASB makes an informal application for an award of attorneys' fees for this appeal.113 "Although we have authority under Supreme Court Rule 20(f) to award attorneys' fees in the case of a frivolous appeal, we will not consider an informal request in the absence of a formal motion made and presented in accordance with the Supreme Court Rules."114

IV. CONCLUSION

For these reasons, we AFFIRM the Court of Chancery's judgment in part, REVERSE in part, and REMAND for further proceedings consistent with this opinion.