Fee Agreements Should Be A Two-Way Highway

edward-pollToday’s guest post was written by Ed Poll. You can learn more about him at the end of the post.

*********

Environmental concerns are important, but when it comes to client fee agreements, that’s not the time to save paper. To fully address the client’s part of the agreement, it’s critical for the lawyer to prepare a letter separate from the engagement letter, and have the client sign and date it.

When a client selects you to represent you, s(he) expects at least 4 things: skill, diligence, honesty, and responsiveness. Failure in any one of these areas by the lawyer, and the client will pay slowly, if at all. Slow pay or no pay is indicative of trouble brewing in the heartland.

When the lawyer agrees to represent the client, the lawyer effectively says to the client that this is a two relationship wherein the client agrees to tell the truth; provide full disclosure and respond quickly to the lawyer.

The lawyer must detail the basis of the fees for service and agree to pay for fees and costs in accord with their agreement, including timely payment. Any lack of clarity expressed by the client demands further review and explanation. Any remaining uncertainty or failure to agree needs to be reviewed and clarified. Failure to resolve differences will merely cause further issues and disharmony and perhaps further litigation. Oh, and of course, besmirching of the lawyer’s reputation, if not worse.

Describe the firm’s billing process, fees, collection process and any interest that you will charge on unpaid balances. Explain that you expect clients to pay the firm’s bills upon receipt. If you have a policy of reviewing and revising fees periodically, such as annually, state as much.

Most complaining clients say they didn’t understand the fee agreement even though they signed the contract with the lawyer. That’s why the best approach is to prepare a budget of events, costs, expected fees, and time. Indicate that this is only an estimate that the client is reviewing and approving … and not a guarantee; thus, the client has a general expectation to pay “x” and that the expected effort and financial burden and recovery merits the expense and the client agrees to pay per the fee agreement.

Insert a signature box or line beside every significant paragraph for the client to initial that he has read, understands and will abide by the terms of the agreement and the firm’s policies as noted. Ask the client to sign the letter at the bottom of each page as well, with a line stating that, by signing the letter, the client understands the firm’s fee structure and agrees to abide by its billing policies as set forth in the letter.

The fee agreement is another means of making it clear to clients what you expect from them. As with a credit application, it lets clients know that you follow sound business practices. It’s also an insurance policy for the future: Should you ever have to take your client to court to collect, the letter will verify that the client agreed to abide by your firm’s policies and will pay per the client’s agreement.

The written fee agreement also is the appropriate place to state in writing that you will withdraw from the client’s matter if you are not paid in a timely fashion, per his/her agreement. Discuss this point clearly and ask the client to initial it.

Include a section to cover any incentives that your firm will accrue if you win your case. In that instance, clearly define what “winning” would mean in the client’s particular matter. Is it forcing the other side to settle for a smaller amount? Or is it actually winning the verdict in court? Or is it full collection by the client. Be sure that your definition of winning and the client’s definition are the same.

Explain how the firm advances costs for the benefit of the client, and list those fees along with their usual amounts. Which of the costs would the firm expect to be reimbursed in the event of no clear victory in the case? Make sure that the client understands the nature and anticipated amount or range of these expenses and initials those paragraphs.

This also is a good place to explain the firm’s policy on air travel. Do your lawyers fly first class or coach when traveling on client business? Take the time to define in writing what your firm does and why.

And if you are particularly concerned about being paid for those costs later–again, ask the client to initial the paragraphs.

Edward Poll, J.D., M.B.A., CMC, coaches and consults attorneys throughout the country in the areas of starting and operating a law practice, strategic planning, profitability analysis, and practice development. He blogs at LawBiz, is a syndicated columnist and regular contributor to several major legal publications. His latest book, Life After Law: What Will You Do With the Next 6,000 Days? has received national recognition for helping lawyers plan for the time they decide to leave the practice of law. Ed is a Fellow, College of Law Practice Management®, Board Certified Coach to the Legal Profession, SAC® .  

« »

Practice Management Tips You’ll Actually Use

Proven strategies from legal experts, delivered straight to your inbox


No thanks, not right now