Explaining retainer agreements to clients before they sign

February 26, 2015

Attorney communicationRetainer agreements and engagement letters should, of course, be tailored to the particular circumstances. For example, the letter may memorialize the attorney’s retention as general counsel to a corporation. In such situations, the letter may include a non-specific description of the services that will be provided by the general counsel, (see Specialty Form at § 1:243) or the parties may opt for a detailed list of the services to be provided by the attorney. See Specialty Form at § 1:244. Some attorneys prefer to use a relatively casual description of the services to be performed and the billing practices of the firm.

In some cases, the representation will be limited to specific matters (e.g., formation of an investment partnership or negotiation of a real estate purchase or lease). A contingent fee arrangement may often be appropriate for litigation-oriented engagements. See Specialty Form at § 1:251. A contract to employ a law firm on a non-contingent basis usually implies a straight hourly billing formula. See Specialty Form at § 1:252. Other situations that might require specialized forms include a fixed fee arrangement (see Specialty Form at § 1:253), an agreement between an in-house legal department and an outside law firm for particular services that will be rendered by the outside firm, (see Specialty Form at § 1:245), an agreement for outside general counsel services (see Specialty Form at § 1:245.50);  a fee contract for the preparation and delivery of a legal opinion on behalf of the seller in a sale of business transaction (see Specialty Form at § 1:254) and an engagement letter for representation of a corporation and several of its employees as codefendants in a litigation matter See Specialty Form at § 1:246.

Law firms should make the process of preparing engagement letters as efficient as possible by creating and maintaining a library of “standard forms” that take into account all of the most common issues raised by the firm’s typical clientele as well as recommendations made by state and local bar associations. Each attorney should be familiar with all of the terms in the firm’s engagement letters and be prepared to explain every word to prospective clients using a checklist of the matters that need to be highlighted with clients when discussing the scope and terms of the attorney-client relationship with them (see § 1:262). A firm partner, or the firm’s executive director, should be available for consultation on the meaning of the language in the firm’s templates, as well as on how to handle requests for adjustments to address specific cases, transactions or other projects.