Dana Riel and David Michael
Sixth in a Series

Once upon a time, long, long ago, there were those who claimed they could do business “on a handshake”.  That is not the case today.  No matter how well an attorney knew the client before they became a client, no matter how simple or clear cut the matter involved, there are several reasons why the first step in a firm’s interactions with a client needs to be a fee agreement.  We’ve seen many examples from our clients.  Some are well written and defined.  Others are not.  In this article, we want to look at several key factors that should be included to ensure clarity, fairness and protection for both the firm and the client.

1. Fee Structure – What is the billing arrangement – hourly, flat fee, contingency? If hourly, what are the rates and time increments?  If a flat fee is involved, what specific services are involved?  Is the fee paid up front, at the end, or in installments?  If there is a contingency fee involved, what percentage will the attorney or attorneys receive if the case is successful?  If the client decides to go to settlement prior to trial, will there be a fee at all?  Are expenses deducted from the settlement or award, or do they need to be paid separately?  And if the client is expected to pay a retainer up front, explain the amount, how it will be used and whether it is refundable.
2. Scope of Representation – Clearly state the specific legal services to be provided. This is important, particularly if the client wants additional services.  Do you have a clause that spells out additional charges (if any) and if the original work attorney will provide them, or transfer the client to another attorney for those additional services?  If the attorney is representing the client in multiple areas, specifically list them.
3. Accepted Payment Methods – Describe the types of payment (check, credit card, ACH, wire) your firm will accept. Provide instructions on how to make those payments (wire transfer information, link for secure payment portal).  And if a retainer is involved, attach a retainer request to the fee agreement.
4. Termination of Agreement – This is critical. What happens when a case or matter goes sideways?  Spell out the conditions under which a client has the right to terminate the legal relationship AND whether any fees will be due upon termination.  Conversely, specify the conditions under which the attorney can withdraw from the matter or case (non-payment, conflict of interest, lack of cooperation, etc.)  Finally, if there is any unused retainer or prepaid fees, specify whether they will be refunded in the case of termination.
5. Dispute Resolution – If applicable, outline how disputes related to fees or other issues will be resolved (arbitration, mediation or another process).
6. Confidentiality of Fees – It is important to emphasize the confidentiality if the agreement between the attorney and the client, and that financial arrangements are private unless disclosed under certain legal contexts.
7. Client’s Responsibilities – Don’t assume a client knows this. Specify the client’s duty to cooperate with their attorney and their obligation to pay the agreed-upon fees and costs.

And finally –

8. State and Local Bar Requirements – Make sure the fee agreement follows the ethical and legal requirements set by the relevant state bar or governing authority, especially in the areas of transparency, fairness and proper disclosure of fees.

Ethical rules for attorneys require clear communication with clients.  A well-drafted fee agreement can help prevent disputes between the client and the firm by setting expectations clearly from the beginning. Here’s where we can help!  Our consultants at Crosspointe Consulting Group have the advantage of advising hundreds of law firms in multitude of areas of practice. Call us at 877-375-2810 or write to us at [email protected] to leverage our wide-ranging experience in helping you draft Fee Agreements specific to your area of law and law firm culture.

See also:

Business of Law: Conflict of Interest Management

Business of Law: Confidentiality and Data Security

Business of Law: Competence Clarified

Trust Account Management – Where Fiduciary Duty Meets Financial Sense