What is a Fee Agreement?
Fee agreements (also known as fee contracts) are legally binding documents that specify the fees a client will be expected to pay in return for the services a company or individual provides. While fee agreements may be used in a large number of industries, they are most well known in the legal field, where they are used to create a binding contract between an attorney and their client.
These arrangements are important when it comes to clearly outlining what a client can expect from the professional services offered. Having these contracts in place helps to make sure these parties are capable of meeting their financial obligations while also providing a level of assurance to the client that their attorney will deliver on their promised services. In this regard , having a solid fee agreement in place is advantageous for both parties.
A common aspect of legal fee agreements is the fee structure, which can vary dramatically from firm to firm. These may involve simple hourly billing with no advanced agreed-upon parameters set, flat fees for specific services that have been spelled out, or just a written retainer agreement with all details spelled out in advance. This can depend on how the client prefers to be billed, as well as the nature of the agreement between the two parties.
Having a solid fee agreement in place helps the involved parties make sure legal representation is financially feasible and needs are met.
Key Components of a Fee Agreement Template
The fundamental elements that are essential to the formulation of a properly created fee agreement would be, at a minimum:
- Payment terms – the agreement should detail when fees will be due and how they will be collected.
- Obligations of the parties – both the client and lawyer should have provisions that specify their respective duties under the agreement.
- Scope of services – The agreement should set forth in detail what services are being offered by the attorney, any limitations, and whether there are additional services that are available to the client.
- Late payments – what happens if the client is late in paying the fees.
- Dispute resolution – should there be any dispute with the fees charged, outlined a system for mediation and/or arbitration, as well as testimonial systems.
- Revisions of the fee agreement – how often can the agreement be revised, and how will the revisions be made.
- Severability – if any clauses in the contract are rendered void, how does that affect the remaining terms of the agreement.
The above elements are not necessarily the entire extent of an effective fee agreement, but certainly the components that should be included.
Tailoring and Modifying a Template
One of the biggest advantages of fee agreements is that you have the power to write them from scratch. It seems like a lot of attorneys share what they already use rather than inventing new contracts. On one hand, this is great because it fosters openness and idea-sharing. On the other, this creates a level of dependency on others’ guidelines that will inevitably leave out the best solution: your own.
This is why customizing a fee agreement template is crucial for your business. If you don’t spend the time making an agreement work for your firm, you are leaving money on the table. Compliance is not the only benefit to be gained either – customizing your contract empowers you to close more clients while feeling confident that you are explaining a process that you fully understand. Prospective clients can spot an unprepared attorney from a mile away, so demonstrate your expertise by making your contracts work for you.
Here are some of the opportunities I’ve seen for agreement customization.
I’m not asking you to reinvent the wheel. My fellow legal professionals have created templates before, and if you are trying to save time then I would encourage you to start there. Just don’t expect that agreement to be a perfect 1:1 representation of how you intend to build your business relationships. Step one is adapting the contract for your unique practice and the needs of your clients. Clients have one thing in mind, and that’s solving their issue. You need to know how to handle their concerns before they do.
Not every lawyer has the same client base. Some have high amounts of investor clients and others mostly in retail. Different industries have different levels of expectations and protocols they require. A fee agreement template for a tech startup won’t necessarily apply to the individual artist or small business owner. One of our most popular forms is an Artist Retainer Agreement, and after using the template you will need to customize it for your attorney culture and your area of specialization. In general, it’s good to have a template to jump off from, but you have to know what you are doing. Once you become familiar with the agreement, the real fun starts.
If your firm is big enough, you’ve probably had the experience of onboarding a substantial client. If you’ve never had that happen, congratulations on being a small-firm or solo hero! Even if it was years ago though, you probably spent a long time negotiating with the client to make them comfortable.
The key to impressing clients – especially those with a lot of power or money – is communicating your value before they ever pay a dime. Your fee agreement should prove your worth. If you have already built a strong reputation, there is no reason that the contract should be anything less than a perfect example of why they are hiring you.
Pitfalls to Avoid
One common mistake made by lawyers is language that is vague or unclear. For example, does your version of a fee agreement address whether a client can opt out of costs disbursements as their matter progresses? If the answer is no, then the client may not be aware that sending out a non-standard letter, collecting documents from another party/third party, filing documents at County Court, Land Court, the Supreme Court, Federal Court, sending letters out to various parties, making phone calls to obtain information for the file, booking grounds etc comes with a cost. Though this may be self evident to you and I, it is not necessarily something that is clear to the client.
Some fee agreements provide for certain "free" or discounted services, rather than charging for every little thing that a law firm does. This is great for the client, but will leave the law firm out of pocket. It is up to the law firm to determine whether there is a balance to be struck between their obligations to their clients, the commercial realities of running a law firm and the administration of their practice.
Another common mistake lawyers make when drafting a legal fee agreement is the inclusion of extraneous information. The fee agreement should be straightforward. Keep it simple, concise and commercial. It should state who your client is, what services you are providing on behalf of them (in a general sense), and how much or how it is calculated. There is no need to include detailed explanations and legal reasoning as to the calculation of your fees. If the client has a query about this, you can further explain the calculation as necessary in plain language.
Some law firms find it easier to prepare a client information sheet (as opposed to a fee agreement) first. This can provide a useful summary of your credentials, services, estimated costs and terms and conditions.
If you do not outline what disputes should be dealt with in accordance with a dispute resolution process, then you are leaving the door open for each side to initiate court proceedings, or other legal processes, as they see fit. This is counter-intuitive to the likely desire of the parties, and any external agents and stakeholders (i.e. Land and Environment Court) to have matters resolved as quickly, inexpensively, and as efficiently as possible.
Legal Implications and Regulations
It is essential that you know when you need to require a client to sign a fee agreement. You must consider the legal issues involved in the creation of the fee agreement itself. Is it enforceable? Does it comply with any Tennessee laws regarding fee agreements? You should not use a fee agreement which is boiler plate text which does not take into consideration the broad array of factual possibilities for your presence in a case. In other words, don’t cut and paste text from the internet that you think might be a good price agreement.
If you are going to draft the fee agreement yourself, you need to be aware of the ethical limitations imposed by the Tennessee Board of Professional Responsibility on the receipt of retainer fees. They limit a flat fee in most settings. There are certain times when you can get a flat fee, which is basically an advance on a contingent fee, for example.
When you are preparing a fee agreement , you also need to consider whether or not you are required to have the agreement recognized by a notary public. In the divorce context this is an absolute requirement. If you are representing a defendant in a lawsuit, you may want to have a notary public sign off on the fee agreement, as well.
You also need to consider what solution the client may have if you breach your fiduciary duty to the client later on in the case. You do not want a client to say that the case was over and that you were giving them advice in the fee agreement and they relied on the advice in the fee agreement; therefore they should get their money back. You want a solution which only gives the client a right to a refund of fees in the event of a breach of fiduciary duty after the client has been warned about the possibility, limited to retaining counsel and advancing funds to prosecute the action.
Tools to Help with Template Creation
For those involved in the preparation of fee agreements, there are a number of powerful tools available for creating templates. For example, with the wide‐spread adoption of Microsoft Word, software is available for conducting an automated template process through contract assembly software. For those using WordPerfect, it is possible to do something similar with WordPerfect macros. The goal of an automated template system is to save time and effort. Within these systems, the final output includes Word or WordPerfect document files, but often also other forms such as PDF documents.
Such tools can also assist with the workflow process in determining the status of the fee agreement or other documents within the automated process.
There are also a number of online web‐based tools available for creating templates. A system like HotDocs Express, an online, on‐demand document assembly service from Thomson Reuters Westlaw, enables you to create templates without purchasing additional software or hardware. Your templates can be stored on‐line in a secure, web‐based system. The interface is similar to HotDocs Desktop in those online templates are created by inserting fields in a base document, normally a Word document. The fields provide prompts to the end user guiding the user toward the correct response.
The same holds true for TurboLaw Office Forms, an online forms drafting tool supporting collaborative drafting. If your firm already uses a cloud‐based practice management system, such as Clio, Rocket Matter, or My Case, you may already be able to drop‐down forms used in a fee agreement template without additional cost. For example, Clio has the ability to create drop‐down fields.
If you do not have access to fee agreement templates, there are a number of companies that will sell templates. Those selling templates likely employ from four to six standard templates. The templates should include broad provisions that can be used with almost any client. The templates should also include provisions that are commonly used by several types of clients, such as individuals, small businesses, or non‐profits.
For each of the examples noted above, you can get further information on the company website.
Keep Your Agreement Up to Date
It is vital that you review and update your fee agreement to make sure it fits today. You may not have the same practice you had two years ago. Perhaps you have changed your business model, merged with another firm, used new technologies, or have new billing personnel in place—even new people to help with collections.
"Spousal support cases can be some of the most expensive civil litigation matters fought in the court system. Absentee representation costs clients tens and even hundreds of thousands of dollars in attorney fees. Refusing to accept credit card payments also can drive up the expense. And clients having unexpected tax obligations at the end of a litigation can result in a reprimand from the State Bar, since the attorney is responsible for explaining all aspects of the financial situation to the client."
It’s important that your fee agreement is drafted to comply with California law, and recent changes in the law. In compliance reviews , we do see non-compliant language or provisions, usually because the law has changed, the law firm has not updated the language, and their risk management department missed it. Compliance with California law is very important as to the validity and enforceability of your fee agreement. For example, if you need your client’s signature on an arbitration of fee dispute agreement, but the fee agreement is not legal, the arbitration is meaningless. Even if your agreement is enforceable, it must comply with closely related rules and regulations, such as the Rules of Professional Conduct. These legal requirements quickly become overwhelming; we can help you with our staff of experienced lawyers, and prevent your from controlling a leaky boat.
Your fee agreement should be revised to reflect your firm’s practice and accommodate your clients’ varied needs and circumstances, as they may vary greatly among clients.
