Do You Think Engagement Letters Are Optional?

Engagement Letters IconEngagement letters seem to be one of those documents that most attorneys intellectually appreciate the value of but often underutilize. The letter simply isn’t in consistent use day to day and the excuses run the gamut. I often hear “Repeat clients would be offended,” “They take more time than their worth, particularly with flat fee work,” “Given our practice areas, there really is no need,” If I had to write one of those every time a question came in I’d never get any work done” or “Our long-term clients know what our rates are.” Yet ironically, it’s the engagement letter that is often presented as the first line of defense whenever a dispute arises over what specific legal services were to be provided. If that letter was never written, you’ve got a problem and it doesn’t matter if it’s in the context of a fee dispute, an ethics complaint, or a malpractice claim. Engagement letters are like buckling your seatbelt. You are taking a necessary step to protect yourself should something unexpected happen down the road.

As the above excuses suggest, too many attorneys appear to view engagement letters as formal documents that read like a contract. While such a document is often called for, particularly with new clients, engagement letters can be far less formal and still be effective. Before digging in to this topic, however, it is important to remember that in the malpractice arena if there is ever a word against word dispute between an attorney and client, the attorney will have the tougher row to hoe. Without supporting documentation, statements like “I told that person that I wasn’t their attorney” or “I never agreed to do that additional work” often don’t carry the day. Thus one of the primary goals of an engagement letter, formal or otherwise, is to simply confirm that you and your client are on the same page in terms of expectations regarding what is to be done and for whom.

What should an engagement letter cover?  For first time clients, consider addressing the following issues.

  • Identify who is and, when necessary, who is not the client.
  • Set forth the scope of representation and detail any exclusions or limitations to the work, particularly if unbundling (taking on a limited scope of representation matter).
  • Discuss the rate or basis of the fee, when or how the rate may change, how frequently invoices will be sent, when payment is expected, and who will be responsible for paying.  Detail how advances will be handled and what costs and expenses the client will be responsible for and when.
  • Identify any conflict issues involved and discuss and fully disclose the impact to the client if the client elects to proceed with the representation with the conflict in play. With significant conflict issues, consider advising the client to seek outside advice about agreeing to move forward with the conflict in play.

OBLIGATIONS

Beyond these basics, a more formal engagement letter can also be used to inform the client about the obligations of both the lawyer and the client during the representation. You might consider discussing the conditions  under which additional work will be accepted, how work on the matter will proceed,  how and when phone calls will be returned, how fee disputes will be addressed, the circumstances that could result in withdrawal, how and when the representation will end, and/or the specifics of your file retention destruction policy.

FLAT FEE

For flat fee in-and-out work or with long-term or repeat clients, a more relaxed letter can often take care of documenting the engagement. These letters can be as simple as a confirming email, a “thanks for stopping by” note, or a slightly more formal letter of clarification. Regardless, write to your audience. The idea here isn’t to write a CYA letter; but to confirm that everyone is on the same page. Memories can be short, and again if there is no writing, a problem could arise down the road. Even though they are informal, these letters should still focus on the basics. At a minimum clarify and confirm who the client is, what the scope of the representation is, the rate or fee to be charged, and any other critical information. Attorneys who do this well often use this more informal engagement letter as a way to start to drive the matter forward simply by including a statement or two that sets forth what will happen next.

While the items discussed thus far continue to be the building blocks of a good engagement letter, there are other concerns you might consider addressing.

SOCIAL MEDIA

There are a host of issues being created by clients who are participating in social media. Fortunately some of these issues can and should be addressed in an engagement document, formal or otherwise. While these issues will continue to change and evolve over time, it helps to come at the problem by remembering what it means to be an attorney. Think legal advisor. For example, some clients have no idea what the term “attorney-client privilege” means nor do they understand the ramifications of losing it. What would happen if a client posted a copy of an email from you to their Facebook page, tweeted status updates every time they heard from you, or regularly communicated with you using their work email address? You are the attorney and given the realities of how people communicate in today’s world you would be well advised to address such issues with the client at the beginning of representation. A perfect place to do this would be in an engagement letter.  Topics you should consider addressing include the responsible use of email; should the client’s participation in social media be limited or even restricted for a period of time; should communication via employer owned devices to include smart phones, computers, and tablets be curtailed; and should passwords on personal accounts be changed to prevent unauthorized access by an opposing party.

Taken together, my hope is that the above thoughts lend enough support for engagement letters to warrant their regular use on all new matters, not just with new clients. Set the excuses aside. A well drafted engagement letter creates a road map of the terms and conditions of the representation.

Finally, allow me to leave you with one final thought. Who has hired who? There is real value in taking the time to acknowledge and honor your clients by saying thank you for bringing new work to the firm and doing this in a professional and informative way that confirms the road ahead.  This is done in an engagement letter. It can be powerful stuff.

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®.

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2 comments on “Do You Think Engagement Letters Are Optional?

  • My retainer agreements pretty much focus on the issues you presented. Focus is on describing a clear scope to the representation, describing how the fee will work, and making it clear that if the client doesn’t pay the agreed upon fee then I will not start working on the case.

    I also use it as an opportunity to explain to the clients how I use the cloud for client files storage and to set forth a preference that clients e-mail me questions before calling me. I make it easy for clients to sign the agreement by sending it using an electronic signature service so that the clients who choose to pay via paypal can send me payment right away. (any transaction fees are removed from my portion of the initial non-refundable fee for starting the case so that the remainder that is not yet mine can be placed in full into the client trust account).

    Finally, because I do a lot of fixed fee work, I include a method for calculating earned fees if there is a dispute over whether I earned the full amount of the fee or the client decides to fire me before I finish working on the case.

    • Paul, as you know, the agreement is about CYA and so in as clear and as nice terms as possible, you have to lay out all the responsibilities of the ‘partnership’ in this representation. Sounds like you’ve got a really good handle and keeping it up to date to accommodate technology.

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