Attorney Fee Agreements: What Your Engagement Letter Should Say Before You Sign

A fee agreement, also called an engagement letter or retainer agreement, is the contract that says what your lawyer will do and how you will pay. Before you sign, it should clearly state the scope of the work, the fee type and rates, how costs are handled, what deposit is required and where it is held, how often you will be billed, how either side can end the relationship and how refunds and disputes are handled. If any of those are missing or vague, ask for changes before signing.

Most disagreements between lawyers and clients about money trace back to something the agreement did not say. Reading it carefully is the cheapest legal protection you will ever buy.

When a written agreement is required

The ABA Model Rules say the scope and basis of the fee should be communicated, preferably in writing, and require writing for contingency fees. Several states go further:

These are summaries; each rule has exceptions, such as emergency work or services for existing clients of the same kind. Your state bar can tell you what applies locally. Even where writing is optional, insist on it.

The key clauses, explained

Scope of representation

The agreement should name the matter and describe what the lawyer will and will not do. "Represent client in dispute with ABC Contractors through settlement or trial in county court" is far clearer than "represent client in legal matters." Look for explicit exclusions such as appeals, collection of a judgment, counterclaims or related tax issues.

Fee basis and rates

For hourly work: each timekeeper's rate, the billing increment and whether rates can change. For flat fees: the price, what it covers and when it is earned. For contingency: the percentage at each stage and the method for calculating it. The fee structure guides on hourly billing, flat fees and contingency fees explain what to look for in each.

Costs and expenses

Which expenses you pay, whether the firm advances them, whether they are billed at actual cost, and whether you owe them if the case is lost. Look for clauses on in-house copying, research charges and administrative fees.

Advance deposit

The amount, confirmation that unearned funds are held in a client trust account, any replenishment requirement and how the unearned balance is refunded at the end. See retainers and trust accounts.

Billing and payment

How often you receive itemized invoices, when payment is due, whether interest accrues on late balances and whether the lawyer may stop work if invoices go unpaid.

Communication

Who your main contact will be and how quickly you can expect replies. Some agreements also describe how the lawyer will keep you informed of significant developments.

Termination

Clients can generally discharge a lawyer at any time; lawyers can withdraw only for permitted reasons and, once a case is filed, often need the court's permission. The agreement should explain what fees are owed if the relationship ends early, especially in contingency cases. See changing lawyers.

Dispute resolution

Whether fee disputes go to a state bar fee arbitration program, private arbitration or court. An agreement to arbitrate malpractice claims, as opposed to fee disputes, is more controversial; ABA guidance says a lawyer should fully explain such a clause and the client should be able to get independent advice about it.

File retention

How long the firm keeps your file after the matter closes and how you can get a copy.

Clauses that deserve a second look

1. "Non-refundable" fees. A fee must still be reasonable, and unearned advance fees generally must be refunded.
2. Minimum fees that apply regardless of the work done.
3. Automatic rate increases without notice.
4. Interest on overdue balances without a stated rate.
5. Liens on your property or recovery for unpaid fees, which may be permitted but should be understood.
6. Waivers of your right to dispute bills after a short period.

None of these is automatically improper, but each should be explained to you in plain language.

Worked example: reading a contingency clause

Illustrative text: "Attorney's fee shall be 30% of the gross recovery if resolved before filing suit, 35% if resolved after filing suit, and 40% if resolved after trial begins. Costs advanced by attorney shall be reimbursed from client's share."

• On a $50,000 settlement after filing: 50,000 x 35% = $17,500 fee.
• If costs are $4,000 and come from the client's share: 50,000 - 17,500 - 4,000 = $28,500 to the client.
• The clause does not say whether the client owes costs if there is no recovery. That is a question to ask before signing.

Check your own numbers with the contingency fee calculator.

Use the checklist

Work through the fee agreement checklist with the draft in front of you. For how this fits into the bigger budget, see the guide to estimating legal costs.

Frequently asked questions

Can I negotiate the terms of a fee agreement?

Yes. Billing increments, staffing, caps, deposit size, payment schedules and contingency percentages are all open to discussion, though not every lawyer will agree to changes.

What if my lawyer never gave me a written agreement?

In states that require one, the lawyer may be limited to recovering a reasonable fee rather than the claimed rate. Elsewhere, the fee must still be reasonable. Ask for written terms now.

Is an email confirming the fee enough?

For non-contingency work it may satisfy a "preferably in writing" standard, but a signed agreement covering all key terms is far better. Contingency agreements must be signed.

Should I have another lawyer review the agreement?

For high-stakes matters or unusual clauses, a brief independent review can be worthwhile.

Sources

• American Bar Association — Model Rule 1.5 and ethics guidance on fee agreements
• The State Bar of California — written fee agreement requirements and sample agreements
• New York State Unified Court System — Part 1215 letter of engagement rules and client's rights notice