What Should Be in Your Lawyers' Fee Agreement

If you're hiring a lawyer, make sure you have a clear, written fee agreement that spells out the cost of legal representation, related expenses, and the work to be done.

Most disputes between lawyers and clients are over money—specifically, over how much money the client owes the lawyer. To avoid these problems, some states require written fee agreements. Even if your state doesn’t require one, you should get a written record of what you agreed to pay the lawyer, so everyone is clear about the agreement.

A fee agreement—also called a retainer agreement or representation agreement—sets out the fees, as well as the terms of the lawyer-client relationship. The agreement should clearly explain how the lawyer’s fees will be paid, who will work on the matter, and if you are involved in a lawsuit, how the court costs will be paid.

The agreement can also set out the circumstances in which either you or the lawyer can end the relationship, or it may set out rules of conduct—for example, that the lawyer will communicate regularly with you about lawsuit developments or that you will respond promptly to requests from the lawyer.

A fee agreement is a contract that binds both you and the lawyer. Like any other contract, you should sign it only after you are confident that you understand all of its terms and are happy with them. If something isn’t clear, don’t hesitate to ask the lawyer for an explanation. If you get a clear and sensible answer, you’ll feel better about your decision to hire this lawyer; if you don’t, it’s a red flag you shouldn’t ignore.

Fees

Fees are commonly structured in one of three ways: you either pay by the hour, pay a flat fee, or give the lawyer a percentage of whatever you win in a lawsuit.

Hourly fees. The most common form of lawyer compensation is the hourly rate, which can range anywhere from $100 to $300 or more. If the lawyer’s office uses legal assistants (trained nonlawyers who are sometimes called paralegals), you should be charged less for their time—probably about $50 to $75 per hour. The fee agreement should set out:

  • the hourly rates of the lawyer and anyone else in the lawyer’s office who might work on the case
  • how often you will be billed
  • how much detail the bill will include, and
  • how long you have to pay the bill.

If the lawyer will require you to pay a deposit in advance (often called a retainer), the agreement should include the amount.

Flat fees. Less common is a flat fee for a particular legal task. Lawyers charge a flat fee for a matter that’s essentially routine—for example, drafting a simple will or power of attorney. Flat fee services are also common for bankruptcy filings,  business formation, and routine immigration services. However, most legal matters involve some uncertainty about how much effort and time will be needed, though, making a flat fee impractical. If a lawyer quotes you a flat fee, be sure you know what’s included in the basic fee and what’s not.

Contingency fees. In certain kinds of cases, a lawyer waits until the case is over, then takes a percentage of the amount you win as a fee. If you win a big amount, the lawyer’s fee climbs proportionately; if you lose, the lawyer doesn’t get a fee. This method of payment allows lawyers to aggressively represent people who have been wronged but can’t afford to pay a lawyer. This type of "no win, no fee" arrangement is common in personal injury cases. The lawyer agrees to help you settle your claim or file a lawsuit, in return for a handsome portion of a successful outcome. This system works well, but keep in mind that in many straightforward cases, the personal injury lawyer is paid handsomely for relatively little work, so it pays to negotiate the fee in advance.

If you’re paying a contingency fee, the agreement should state what percentage of any award the lawyer will take, whether that percentage will change over the course of the lawsuit (some lawyers collect a higher percentage if the case goes to trial than if the case settles our of court), and how the lawyer will collect the money. It should also cover whether or not the lawyer will be entitled to a portion of whatever you win even if you fire the lawyer before the case is finished.

Litigation costs

If you’re in (or headed for) a lawsuit, the agreement should explain how litigation costs will be handled. These costs include such things as fees for filing papers in court, court reporters, expert witnesses, private investigators, process servers or stenographers, copying costs, travel expenses, and messenger fees. Even if a lawyer takes your case on a contingency fee basis (like the personal injury example), you still have to pay these costs, which can add up to several thousand dollars. The good news is that if you win your case, the judge will usually order your adversary to pay you back for these costs. Your agreement should spell out which of these costs you’ll have to pay, which (if any) your lawyer will pick up, and when you’ll be expected to pay them. Some lawyers in contingency fee cases will front the money for costs; if you win, the lawyer is reimbursed from the award, but if you lose you’ll have to figure out some way to pay back the lawyer.

Other Issues

The agreement should also address these issues:

Extent of the representation. The agreement should make clear that the lawyer will represent you in all legal proceedings, up to and including trial if that’s necessary. Some lawyers don’t handle appeals or other post-trial proceedings such as judgment collection—if this is true of your lawyer, the agreement should say so.

Who will do the work. The agreement should specify who will be the “lead counsel” on the case and what that lawyer will handle personally.

Working together. Some agreements explain how the client and the lawyer expect to work together. For example, you might spell out which decisions the lawyer can make alone and which require your approval, or state that you will be honest and forthcoming with the lawyer.

Ending the relationship. Some agreements state how each party can end the relationship. For example, an agreement might state that the lawyer can quit at any time, or that the lawyer may quit only under specified circumstances.

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