The Importance of Retainer Agreements to Client Satisfaction.
Although only certain types of cases require retainer agreements, it is considered a ‘best practice’ to always enter into a relationship with a client under a well written retainer agreement to protect both you and the client. Clearly defining both your expectations and those of a potential client before entering into an agreement for representation will almost always curtail misunderstandings and reduce the likelihood of dissatisfaction. Now that we are all in agreement that retainer agreements are something we should be doing, what exactly should this retainer agreement contain?
First, you should explain the scope of your representation to the client. Describe what you will be doing on behalf of your client, and perhaps what you will not be doing. For example, you will be assisting a client with a landlord/tenant issue, but you will not be handling any appeal resulting from that matter, unless a separate agreement is reached. Reducing the scope of your representation to writing in your retainer agreement ensures that there is no confusion later about what exactly you’ll be doing and where your services begin and end.
Now that you’ve agreed on (and written down!) the scope of your representation, it’s time to agree on the fee and fee structure that you will charge for your services. The retainer agreement will need to clearly lay out your fee structure in a way that is not overly confusing or burdensome to the client. There are three ways that attorneys are typically paid: the contingent fee, the flat fee, and the hourly fee.
A contingency fee means that a client is not on the hook for the time that the attorney spent on their case unless the client obtains a successful outcome. This fee structure is typically used in cases where a successful outcome means that the client obtains financial compensation, like in personal injury, medical malpractice or disability benefits cases. A contingency fee agreement cannot be used certain kinds of cases, like criminal cases. See RPC 1.5(d). Even if the attorney does not obtain a successful outcome, the client may still be responsible for certain costs associated with their case, like postage, copying medical records, or court filing costs. This is the one type of fee structure in which a written agreement is required in North Carolina under the Professional Rules of Conduct. See RPC 1.5(c). It is common for clients to have difficulty visualizing or calculate how attorney’s fees work in contingency matters. If that is the case, consider emailing or sharing an Attorney Fee Calculator with the client so that they can better understand the math.
A flat fee agreement means that agreed-upon services are provided for an agreed-upon price. This structure is often used for smaller or a la carte projects, like a demand letter or for projects that do not necessarily involve reinventing the wheel with each case, like simple estate planning. Clients often appreciate flat fee agreements because there is no guesswork involved in determining what exactly will be coming out of their pocket. Flat fee agreements, however, may sometimes leave the attorney spending much more time on a matter than initially anticipated and therefore not charging as much as they probably should have from the outset. This is not cause to adjust your fee, though, so choose wisely!
An hourly fee means that your client pays for the time that you spend on their case, by the hour or partial hour. Billing is traditionally done in six-minute increments. Staff or paralegals can also bill for time spent on a case. The hourly rate for everyone in the firm that will be working on a client’s case should be discussed, agreed upon and set out in the retainer agreement.
The amount of the fee can vary, but there are some important considerations in determining the fee amount that you will charge. The fee amount must not be clearly excessive, which is dependent upon several factors enumerated in the Rules of Professional Conduct, like the time required for the matter, the novelty and difficulty of the question involved, the fee customarily charged in the locality for similar legal services and so on. RPC 1.5(a). You will also want to consider whether there is a statute or other regulation that prescribes the maximum amount you can be compensated in contingency fee cases and ensure your retainer agreement is set accordingly.
Finally, we’ve established the work you’ll be doing and how much you’ll be paid, but none of that is any good if you don’t actually receive payment. Clearly describing the terms of payment to a potential client is difficult to understate. Most commonly, fees are paid in advance and maintained in trust until they are earned. Any unused portion of fees paid in advance must be returned to the client.
What if you have a potential client with a great case, but they don’t want to pay put down a large payment for your fees? Do you let that potential client walk away? The answer to this depends on your tolerance for playing the bill collector. While it may be a short-term solution, it will likely hinder your success over the long haul. You are running a business, and in order to successfully do so, you need your clients to pay for the services that you are rendering.
While it may take you a little time to draft a retainer agreement that works for your practice, once you have one that you like, using it for each new client is quick and easy. Using a retainer agreement clearly defines the expectations for both your services and the client’s payment for those services right there in black and white.
Jared Pierce hung his own shingle right out of law school and has spent every minute since then discovering the joys and difficulties of chasing success. Anyone who has ever met Jared will tell you h