As a cyclist, I truly understand the importance of a well-balanced wheel for ensuring a successful ride. After completing my recent ride, I thought about the analogy between the smooth bike ride and a successful client engagement. The difference between my smooth rides and not-so-smooth rides can be condition of the wheels – one loose or out of balance spoke can lead to a bumpy ride or even a ride ending crash. In comparison, the difference between a successful, profitable client engagement and one that is bumpy or ends in a crash can come down to having a well written and executed fee agreement. A fee agreement is a contract which outlines the terms of your business relationship.
There are many resources out there to help you design a fee agreement contract. Having reviewed and helped design a few, I believe incorporating these 8 key elements or spokes into your fee agreement will help you on your way to having a successful and profitable client engagement. As illustrated below, each spoke contributes to the success of the client/attorney engagement.
8 Key Spokes = Fee Agreement Elements:
1. Who is the client and what legal services are you providing. Are you representing the company or the individuals in the company? For a probate matter, there can be multiple parties. In this first section, be clear about who you are representing and for what.
2. You’ve conducted a conflict check and documented the results based on your own internal procedures. But how will you handle the situation of a conflict arising during representation? You have a duty to notify existing clients of a potential conflict. Spell it out here so the client understands. Great article: Conflict Checking Systems from A to Z by my friend Jim Calloway.
3. The ABA Standing Committee on Ethics and Professional Responsibility published an ethics opinion in Sept, 2011 outlining an attorney’s duty to protect the confidentiality of email communications with one’s clients. Here is a link to the formal opinion published – ABA Opinion 11-459. In simple terms, it means that you need to explain to the client that if they give you a work email address to communicate with them, the confidentially of these email communications may be at risk if the employee gains access to these communications.
4. Fees – go ahead, put it in writing:
- Is this a flat fee case, hourly or contingent (which requires a special fee agreement)?
- What does your flat fee include? Are expenses included? What if you end up in trial, will you convert this agreement to hourly?
- What is your hourly rate, your paralegal’s hourly rate?
- If you annually increase your billing rates, will the new rate apply to this matter?
- Your client will want an estimate. Put in writing: “Estimates are just estimates.” There are many things out of your control that may increase time spent.
- Create a case budget spreadsheet so the client visually sees the cost of this legal matter.
5. Expenses: what kind of out of pocket expenses will the firm incur and pay on the client’s behalf, if any. List these types of expenses. For example, a client may have no idea that it actually costs $280 to file a document with the court.
6. Ahh, retainers, great to get but also a source of potential miscommunication and confusion as discussed in a previous post. Where’s the Money?
7. Billing and Payments:
- Monthly, quarterly; via email or regular mail;
- Forms of payments you accept;
- What happens when the account becomes past due;
- Do you charge interest on past due accounts;
- Can you terminate the relationship, withdrawing under applicable rules of professional conduct, for failure to pay invoices;
- Include a sample invoice – this also is one of those times, for the client, when seeing is believing.
8. File retention policy and termination:
- How long you will retain documents, in what form (electronic vs. hardcopy);
- Maintaining confidentiality of the documents retained.
- Add a sentence allowing you room to terminate this agreement in the case of non-payment or the client has become difficult to work with.
- If client terminates the relationship, outline their responsibility of payment of legal services rendered and expense incurred before termination.
The Hub of it All: Confirmation, acknowledgement of terms and conditions and signatures.
This last section is the piece holding all other spokes together as you make that first pedal stroke.
- Get it signed, preferably in person, so you can answer any questions or see that scared look in their eyes.
- Get it signed while it is all still fresh in everyone’s mind and before you start doing work. How quickly they can forget – $1,000.00 later when they get their first invoice and your billing administrator can’t locate that signed fee agreement.
Every engagement has its share of challenges. You can absorb the bumps much easier if all the spokes are in place. Thanks for reading and next time I’ll give examples of different types of fee agreements needed and why.