Fee agreements are an important part of any firm’s operations. They help protect both attorneys and clients and prevent any misunderstanding about the work to which both parties have agreed. Fee agreements may differ across firms, practice areas, and states, but they should all have these four critical components.
Identity of the Client. This seems simple, but client identity can actually be somewhat complicated, as well as a potentially confusing matter for any non-legal professionals involved in the matter.
Failure to accurately identify the client in a case can lead to a loss of attorney client privilege, or even malpractice. Clients aren’t limited to individuals—they can also be an entity like a company or a board of directors. Fee agreements can be used to make these less intuitive designations clear to everybody involved.
Scope of Work. Scope of work is the second critical component of any fee agreement. Failure to do this can harm both law firms and clients.
For example, a client might continually bring new projects to the table and expect them to be covered by an initial agreement. Conversely, if an attorney misunderstands what a client expects and bills for more work than the client intended to contract, the client may refuse to pay.
Fee Amount. Clients want to know exactly how much they are expected to pay. In addition to clearly explaining hourly billing rates and flat fee costs, it is also a good idea to address which types of advanced costs the client may be expected to reimburse. These can include both hard and soft costs such as clerical services, filing fees, deposition fees, and travel expenses. Billing for costs associated with a case is common practice, but clients who don’t anticipate this charge resent it, or even refuse to pay.
Payment Terms. Just as important as how much a client will pay is when a client’s payment will be expected. This should be delineated in the fee agreement. Some firms also charge interest or late fees, which should be explicit in the agreement, in addition to any consequences for non-payment.
When drafting a fee agreement, it’s important to take into consideration any potential issues that could arise or the client could content in the future. It should be clear to the client what the costs are, what work will be completed and who is involved.