Explaining a Fee Agreement
Any time you hire an attorney, they should provide you with a fee agreement to sign. The fee agreement provides both you and the attorney with some certainty as to what the attorney has agreed to do for you and what you are supposed to provide the attorney for his services. It is both good practice and an ethical requirement for the attorney to get this in writing. Attached is a copy of the fee agreement I use in my office. Download Fee Contract (Hourly) Although it doesn’t fit for every client and situation, it generally has the same language and intent for business clients, personal injury clients, family law clients and others.
The introductory paragraph makes it clear who the firm is and who the client is. While this may seem obvious, and frequently is, it is very important to establish just who the client is. A lawyer has different and stronger ethical obligations to a client than a non-client. Note that a client is not necessarily the one paying the attorney fees. If the client is a child, the guardian will sign for the client, but the duties still run to the child.
Paragraph 1 of my fee agreement also makes it clear that if a corporation is the client, that the person signing is authorized to sign. Frequently with small companies, the individual signing, as well as his company, has issues. That person will need to sign twice, once for himself and once for the company for the attorney to represent both. (This is assuming there is no conflict of interest in representing both).
Paragraph 2 makes it clear what the client is hiring me for. I don’t want to do work for a client for something they don’t want or need me to do, and neither do I want the client to think I am working on an issue when I am not. The latter is especially dangerous as a statute of limitations could expire and the client could find a valid claim prevented by the passage of time.
Paragraph 3 sets forth the client’s duties. If I can’t reach a client with important decisions regarding their case, I’ll have to withdraw. If a client is not truthful with me, I can’t give good advice on their case, and if it causes an ethical conflict, I’ll have to withdraw.
Paragraph 4 is the retainer for an hourly contract. Essentially this is a refundable retainer that is based on a minimum amount to make a good start on a civil lawsuit. I will then send out monthly bills as set forth in Paragraph 5 and show the money moving from the client’s trust account, to the firm’s operating account. When I am no longer representing the client, for any reason, any funds remaining in the trust account of the retainer are refunded.
Paragraph 5 is the rates for an hourly contract for attorneys, associates, and staff. Usually in my firm, one attorney and one paralegal work on a case, but occasionally other attorneys and staff will contribute. One of the questions every client should ask a potential attorney is who will be working on the case. In some firms, while a partner may sign up the client, a junior associate will do all the work. The staff work that is billed is usually confined to paralegal work as opposed to general office work such as copying, cover letters, and filing.
In some cases, I will agree to represent the client on a contingency fee basis. Rather than an hourly rate for the fees, I will charge a percentage of the total recovery. For some cases in our firm, usually in the family law realm where the legal service is very specific, for a small amount of time, and we have a very good idea regarding the amount of work that needs to be done, we can charge a flat fee.
Paragraph 6 defines the costs. Note that costs are in addition to the hourly rate or the percentage amount obtained by contingency. They are simply pass-through charges that are specific to the file. The biggest cost is usually when expert witnesses are hired. Those large costs are discussed with the client before they are incurred.
Paragraph 7 gives my firm the duty to provide written monthly statements in hourly cases, and provides for interest for past due amounts.
Paragraph 8 is the discharge. Essentially the client can terminate the contract for any reason or no reason. My firm can only withdraw with good cause. Usually when I am forced to withdraw it is for a lack of cooperation or a lack of payment. Although I have to file a motion and have a hearing before a judge before being allowed to withdraw, this process is not billed to the client. After withdrawal, the former client would owe any past balances for any work my firm actually did on the case.
Paragraph 9 makes it clear that I cannot guaranty any result. In fact, I am ethically prohibited from making any such guarantee.
Paragraph 10 is for situations where some work has been done, usually where time is of the essence, before a contract has actually been signed.
Paragraph 11 is basic contract language that preserves most of the contract even if for some reason a particular portion can’t be enforced.
Paragraph 12 is what is known as a merger clause. It makes it clear that the fee agreement is what governs the arrangement, not any prior agreements, statements, promises etc. If you are expecting something different or additional than what is in the agreement, be sure it gets included.
Finally, the attorney who will be in charge of your case signs and the clients sign. When there are multiple clients, the all need to sign. They are usually billed jointly, but each is responsible for the entire amount of the bill.
–Bradley A. Coxe is a practicing attorney in Wilmington, NC with Hodges & Coxe PC who specializes in Personal Injury, Medical Malpractice, Homeowner's Associations, Contract and Real Estate disputes and all forms of Civil Litigation. Please contact him at (910) 772-1678.