What Should Be in Your Lawyers' Fee Agreement

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've agreed to pay your lawyer, so everyone is clear about it from the start of the case.

A fee agreement—sometimes called a retainer agreement or representation agreement—sets out the agreed-upon fees, as well as the terms of the lawyer-client relationship. The agreement should clearly explain the agreed-upon fee structure, who will pay for costs and expenses related to preparing and pursuing your claim, and when costs and expenses will be paid. Many fee agreements also lay out lawyer and client duties and explain how the attorney-client relationship can be terminated.

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. 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.

Attorney Fees

Fees are commonly structured in one of three ways:

• hourly fees
• flat fees, or
• contingency fee (you pay 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 from $100 to $500 or more. An hourly fee agreement should set out:

• the hourly rate of the lawyer
• the hourly rate of anyone else who works on the case (for example, paralegals)
• how often you will be billed
• if you're required to pay a deposit (often called a retainer)
• the deposit amount
• if you'll have to replenish the deposit, and
• how long you will have to pay fees and deposits.

Flat Fees

Flat feels are less common than hourly fees. 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, which makes flat fees impractical for many types of cases. If a lawyer quotes you a flat fee, be sure you know what's included in the basic fee.

Contingency Fees

In some kinds of cases, typically personal injury cases, a lawyer 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. Lawyers who work on a contingency basis agree to help clients pursue their claims in return for a percentage of their total compensation (typically 33%). This system often works well, but in some straightforward cases, the personal injury lawyer ends up getting paid a lot for relatively little work, so it pays to negotiate the fee in advance.

If you're paying a contingency fee, the agreement should state:

• the lawyer's fee percentage
• whether the percentage will change as the case progresses (some lawyers collect a higher percentage if the case goes to trial)
• who will pay for litigation costs and expenses (like filing fees, expert witness fees, copying fees)
• whether the lawyer's fee will be deducted before or after costs and expenses, and
• whether the lawyer will be entitled to a portion of your compensation 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 court filing fees, copying fees, and paying for the services of court reporters, expert witnesses, investigators, and process servers.

Even if a lawyer takes your case on a contingency fee basis (like the personal injury example), you'll still likely have to pay for litigation costs, which can add up to several thousand dollars. 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 Common Fee Agreement Terms

The agreement should also address these issues:

The scope of services. The agreement should describe in detail the services the lawyer will provide. For example, the agreement might say that the attorney will represent you through trial and post-trial motions, but not on appeal or in collections proceedings.

Attorney and client duties. 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 client may discharge the attorney at any time and the attorney may withdraw with the client's consent or if permitted under the applicable Rules of Professional Conduct.