Attorney retainer agreement defined
A retainer agreement is a written contract between an attorney and a client. The purpose of the agreement is to confirm a mutual understanding about the terms and scope of the representation, and it serves the benefit of both parties. Law firms understand that going over all of the contingencies with clients when they hire the firm orally would be overwhelming, but it also puts the law firm at a disadvantage because not all parties have the same memory. A retainer agreement means that both sides can point to an enforceable agreement and not rely upon conflicting memories.
A sample attorney retainer agreement provides the scope of the relationship you, as an attorney, have with your client . For example, is the attorney representing the client on a flat fee basis or an hourly basis? Clearly defining the scope of work is essential when giving estimates for future legal work, since additional work may not be covered under the agreement.
It also sets a realistic fee schedule for billing and payments. A sample attorney retainer agreement would also require a retainer that would be used by the attorney towards future fees. Without such an agreement, a client may think that an attorney owes them a certain amount of money at a later date. Having an attorney retainer agreement ensures that the basis for the retainer agreement is controlled by the agreement and can be easily enforced in the event of a disagreement.
Key components of a retainer agreement
The key elements of a retainer agreement are its scope of services, fees, and billing terms. With the exception of these three essentials, the terms of a retainer agreement can vary widely.
With respect to scope of services, the paragraph should be clear as to what the client is engaging the lawyer to do. Examples of specific scopes of services include: estate planning for a husband and wife; criminal defense services in connection with a felony arrest; advice and counsel on a complex federal tax reporting issue.
Fees are typically either hourly, flat fee, or contingent. The lawyer should state how he/she determines hourly rates. Some lawyers have different rates for work during the day versus evening hours, depending upon the type of work performed. (Litigation costs more than estate planning). If the lawyer is being retained on a flat fee basis, then the retainer agreement should state both the services to be performed and the flat fee. If the lawyer takes cases on a contingent fee basis, then he/she should state whether the fee will be calculated prior to or after any costs are deducted. Lung versus throat cancers have different survival rates – therefore the more dangerous form of lung cancer (non-small cell) can warrant a higher contingent fee than the safer type of lung cancer (small cell).
While fees may not be strictly within the purview of the retainer agreement, the payment terms certainly are. Therefore, standard terms such as due upon receipt, annual renewal, or amounts that trigger an unpaid balance charge should be discussed in the retainer agreement.
Different types of retainer agreements
There are three (3) different types of retainer agreements. In a general retainer, a client pays a specific amount of money to acquire the availability of the attorney for a certain period of time, or for the performance of specific legal services. Examples of types of cases in which and for which a general retainer would be used would, perhaps, include the representation of a client in a real estate matter or a homeowner association case. A perfectly acceptable use of a general retainer is in a case where the client requires an attorney’s availability for a short period of time, for a specific purpose.
A special retainer is one where the client pays only for services actually rendered by the attorney. The special retainer is exclusively a cash retainer where the attorney bills the client and the payment made by the client is applied to the bill until the entire balance is paid.
A contingent retainer is by far the most common type of retainer agreement in litigation. A contingent retainer means that no money is going to be paid today; but if the case is won, as much as a percentage of the total recovery may be charged.
Many attorneys use a combined retainer agreement in which a general retainer requirement is provided with the additional requirement that the client pay for any legal work performed above and beyond the fee paid for the availability of the attorney.
The benefits of a retainer agreement
For those in need of legal representation, retaining the services of an attorney may seem to be a rather serious thing. The benefits you receive by having a retainer agreement in place can help both lawyers and clients alike. A retainer agreement, usually incorporated into a contract, is simply an agreement between an attorney and client that stipulates the scope of work that an attorney agrees to perform for a client in exchange for a fee. A properly drafted retainer agreement should simply spell out the understanding of the client and attorney about the services to be performed. In essence, both the attorney and client should understand exactly what services the attorney will be performing for the agreed-upon fee as well as any additional services to be performed at an additional fee. Clients have more flexibility when it comes to their relationship with their attorney with a clear retainer agreement than they do without one. The agreement helps to ensure the client that the attorney has an understanding of the goals that the client wants to achieve, and that the attorney is ready to go to work right away to accomplish them. An attorney benefits from having an agreement in place because he or she saves time and potentially money without the time spent drafting a "fee application" to be reimbursed by the client. Moreover, the attorney can predict the income that can be expected from the client for the remainder of the attorney/client relationship. In addition to this, an attorney can avoid what could be a contentious discussion over what services are not covered in the initial agreement with a clearly drafted document. Confusion or misunderstandings on a retainer agreement could lead to bad client reviews as well as potential malpractice claims. The retainer agreement can also assist in streamlining the attorney’s workflow and ensure him or her that the client is on board with the attorney’s plan of action. While there are many differences between lawyers, the bottom line is that virtually all attorneys can agree to mutually beneficial terms and conditions with their clients. Doing so will make the experience better for both and set the right expectation for the future.
Typical clauses of a sample retainer agreement
What does a "sample attorney retainer agreement" actually say? To give you some insight into this, let’s explore some of the common clauses.
Scope of Services. A sample attorney retainer agreement should lay out what services you are willing to provide to the client. Make sure to be very clear that you do not offer free legal advice, and that the client is hiring you for representation. Do not make assumptions about what clients might think should or should not be included in your services.
Fees. This is generally a standard clause to retain attorneys with a flat fee. It is vital that you are clear about any retainers, and whether you will add fees on for court costs, litigation service fees, filing fees , and other miscellaneous court costs. Some retainers do not include such fees, while others do. Upfront retainer fees should be paid before work paid is done if you have to go to court on the client’s behalf. Also, your fees should be reasonable in accordance to the law firm, and range from $150-500 per hour depending on the case at hand.
Term/Termination. The retainer should state the term of the representation. Besides an hourly rate, a retainer could be either a flat fee, a set monthly retainer, or on contingency. Make it clear once again that a client will not receive free legal advice or consulting. Termination clause should state the termination conditions, however, be general so that you have flexibility.
How to customize an attorney retainer agreement
Retainer agreements are not "one size fits all", nor should they be. Clients should feel free to work with their attorney to create a retainer agreement that meets their specific needs.
The first topics to address in customizing a retainer agreement include:
- What are the terms? Will the attorney charge an hourly rate, a flat fee, retainer, or a contingency?
- When does the client have to pay? Is the payment due up front, monthly, hourly, after services are rendered, after settlement of the matter, etc.? If the payment is due in installments, when will the client be expected to make payments?
- How detailed does the client want the billing?
- For what period of time is the client hiring the attorney?
- What tasks will the attorney undertake?
- What tasks will the client assume responsibility for?
- Is there a dispute resolution clause?
- Does the client want the retainer money to be held in the attorney’s IOLTA trust account?
- Does the client want a formal withdrawal notice, or can the attorney withdraw from the case without formal notice?
- In what scenarios would the attorney open his or her file and refuse to complete the work that needs to be done on the case?
- If the work is completed, will a final bill be sent to the client?
- Under what circumstances can the client ask the attorney to withdraw from the case?
- Under what circumstances does the attorney have the right to withdraw?
- If the client requests documents, how long will it take the attorney to provide them?
- What happens if the attorney drops the case and the client has paid more than what is owed for services rendered?
Common pitfalls to avoid
When properly constructed, an attorney retainer agreement protects both the attorney and client from later disputes about the scope of the representation or fees. However, there are several potential pitfalls. Unfortunately, most people will not read the fine print, so they may find themselves confused or misinformed about what is and is not included in the representation.
For example, in consumer law matters, where clients are represented on a contingent fee basis, many retainer agreements slight the client regarding other types of matters, even those that cross over with the value of the consumer matter. Suppose that you are representing a client on a contingent fee basis for a debt collection case or a fraudulent mortgage lending case in California. In that case, you may be able to recover attorney’s fees, restitution, and rescission, leaving the client with a significant net recovery even after paying your attorneys’ fees. If you do not spell out the scope of the representation, you may find the client wants you to represent them in a parallel bankruptcy case or help them with other claims that are not part of the representation. If you fail to spell out the scope of the representation, you could have an angry client on your hands who believes that you have a moral responsibility to represent them on matters closely related to the matter for which they hired you. This is a situation we have seen more than once with clients who hired other attorneys and have come to us after their attorney charged them a fortune on a different matter. You should also make clear to the client that unless they signed a separate bankruptcy retention agreement, they are not giving up their right to file bankruptcy just because you are representing them for a personal injury or consumer matter.
Another potential pitfall is failing to include a jurisdiction clause. A jurisdiction clause provides that if you are sued for something related to the work for which the client has retained you, the only place where you can be sued for professional negligence and malpractice is the state in which you are retained. This can also help if the client is located in one state and the matter giving rise to your representation occurred in another. For example, if the client hired you to represent them on a housing matter in a different state, you want to make sure it is clear that you have specifically been hired to handle their housing matter in California. Otherwise, even if the underlying matters fell out of your jurisdiction, an attorney in that other state may try to sue you on professional malpractice grounds even for errors and omissions in the competent performance of duties you have performed in California. That there is a potential for this to happen may seem far-fetched, but we have seen clients sue other attorneys who have not been responsible for any wrongdoing. They erroneously believed that any attorney they hired to competently handle a matter was also responsible for other alleged wrongdoing on the part of other attorneys. When describing the scope of your representation, it is important to clearly describe the extent of the representation.
Reviewing and updating an agreement
The legal needs of your business are not static. They may change as the company grows, as it gains new clients or customers, or as you explore new business ventures. This is one of the reasons why it’s so important to schedule a regular retainer agreement review to keep things current.
It’s important to keep the retainer agreement updated, rather than treat it as a static document. In fact, in many jurisdictions, the law encourages you to retain a lawyer on an ongoing basis , as while some legal matters may be resolved on a case-by-case basis, others are better suited to an ongoing resolution approach—an approach that would best be served by retaining a lawyer on an ongoing basis.
A savvy business will review its contracts on a regular basis, as anticipating the potential pitfalls before they occur is a good business practice that can help avoid expensive litigation or loss of customer confidence. Therefore, keeping your retainer agreement up to date is an important part of that process.