We all remember the lecture from the Professional Responsibility class we were required to take in law school: ALWAYS use a written fee agreement!
In addition to the obvious – a well-drafted fee agreement helps you avoid a bar complaint later on – putting your terms and conditions in writing is just common sense. Yes, our grandfathers did deals on a handshake and their word was their bond. Sure they did! And then there was a lawsuit over what exactly was agreed upon. There’s a reason the ABA Model Rules of Professional Responsibility include eighteen rules regarding the Client-Lawyer Relationship.
I was as guilty as the next lawyer: I used to use an engagement letter based on one I used at my former Big Law employer. It had all the basics covered – what the fee was, how billing is handled, and who was responsible for the work. It didn’t cover much else, but it was about seven pages of legalese that sounded good and looked pretty important, and I figured it would protect me.
Until I kicked into contract review mode, that is. I realized a few things were missing, others were overly broad or vague, and that the most basic tenants of contract drafting were not followed. How could I ask clients to hire me to write contracts for them if the very contract I handed them to enter into with me was unintelligible at best.
So I started tweaking it. I based my current fee agreement on a letter agreement for services which I drafted for a client. It is written in plain English with little to no legalese. It is also relatively short – four pages – and includes a separate detailed Scope of Work. And it clearly delineates parts of the agreement using headers. I’m not done tweaking it, but I’ve gotten my fee agreement pretty close to my ideal.
I won’t give you a copy of my fee agreement, mostly because it probably wouldn’t be of much use. You really have to tailor it to the way you run your practice. For example, I say that I want my clients to take advantage of my client portal for secure communication. You may not offer that. In any case, what I can do is outline roughly what makes up a good fee agreement and encourage you to look yours over with a critical and nuanced eye.
Scope of Work
The Scope of Work section of any fee agreement is crucial. It outlines the initial proposed work the firm will do and the fee it will charge for that work. Mine also includes any additional recommended work that we may have discussed but which is NOT included in the original Scope of Work. This helps avoid confusion as to what is and is not included in the fee, and it prevents “scope creep.” Scope creep is what happens when a project starts getting incrementally bigger as the needs of the client expand during the course of work. Inevitably, unless you provide a detailed Scope of Work making it clear otherwise, the client expects to get that “extra” work for free as they will assume it is included in the Scope of Work. Also, be as clear as possible about what you will charge for the work. If you are charging a flat fee plus costs, enumerate the costs so your client knows what is expected. If you are billing by the hour, say so clearly in your Scope of Work. If you are billing on contingency, make that crystal clear, twice.
One more note about the Scope of Work: you should be able to append additional scopes of work to the agreement and the agreement will remain binding as amended by such scopes of work. That way, one agreement is all you ever need with that client, even if you raise your fees later on.
Other sections correspond to one of two categories of things you should address in your fee agreement: things that you ought to always have in a contract; and things you should put in your contract because of bar and/or court rules.
The things you should have in every contract you draft, and therefore also belong in your fee agreement, include:
- choice of law, jurisdiction and venue in case of litigation;
- a mediation or arbitration requirement (as appropriate);
- a merger clause that makes it clear that this is your entire agreement and supersedes any prior agreement;
- a termination clause stating that the client may terminate you at any time, and under what circumstances you may terminate the client; and
- a statement that the agreement may only be amended in writing signed by the parties.
The things you should have because your state bar association requires it will vary, but I have the following:
- a statement regarding client confidentiality and a separate statement regarding the unconfidential nature of certain electronic communication;
- a statement regarding handling of amounts placed into my IOLTA account for safekeeping;
- a statement that a conflict check was performed and the results thereof;
- a statement that the client is responsible for costs and fees; and
- a statement regarding the firm’s billing practices.
Each statement is brief, but I try to address every concern raised by those eighteen rules regarding the Client-Lawyer Relationship!
In the event that you perform work on a contingency fee basis, be sure to double check your bar association rules. In Florida, for example, we have a statutorily-required statement that we must attach to contingency fee agreements (which MUST be in writing) that outlines the client’s rights.
Additionally, at least here in Florida, when a litigation matter concludes, whether by settlement or through judicial process, you and the client (and any referring counsel with whom you have a formal fee-splitting arrangement) must sign a Closing Statement that shows a breakdown of all the moneys paid, attorney’s fees and costs before you disburse any funds. That is probably worth mentioning in your fee agreement.
Again, this has been an on-going process tweaked for my practice needs, tailored to my clients and for compliance with the rules of my jurisdiction.
The key point is: all fee agreements need to be reviewed on an on-going basis. Don’t just assume because someone else has used theirs for years without incident that it will work for you, your clients or your jurisdiction.
I’m sure you have thoughts on this, questions, contributions based upon your practice area or jurisdiction. Please share!
All opinions, advice, and experiences of guest bloggers/columnists are those of the author and do not necessarily reflect the opinions, practices or experiences of Solo Practice University®.