No Time to Save Trees When Drafting a Fee Agreement

Environmental concerns are important, but when it comes to client fee agreements, there is no 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.

The letter should detail the firm’s hourly rates and the client’s agreement to pay the firm’s bills upon receipt. Attach to the letter the names and billing rates of those likely to work on the client’s matter, including associates and paralegal staff, as well as senior partners who may be expected to work on the matter as billable professionals.

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.

Further, provide that no new fee will be implemented without advance notice to the client.

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 firm’s policies. Ask the client to sign the letter at the bottom 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 the 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.

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. Discuss this point clearly and ask the client to initial it.

You also may wish to include sections on arbitration or mediation between the client and your firm should a disagreement arise. 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? 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.