What Makes the Retainer Agreement Valid?
The retainer agreement creates a true sense of contract and improves the odds of getting paid.
Reflect back on what you were taught in your first-year contracts class: An enforceable agreement requires a “meeting of the minds,” consent in the absence of duress, and terms that are specific and not unconscionable. Funny how often lawyers forget these basic principles when they are signing up new clients! There are ample reasons for the flawed process: oftentimes the nature of the work is not all that clear in advance, clients are distracted by the very crisis that is bringing them to your office, and the desire to “land” the client can cloud the lawyer’s ability to present a full sense of the likely trajectory of the representation.
These are explanations, but they aren’t excuses for a poorly-handled retention process. Spending time on the retainer agreement may seem an unnecessary distraction from getting down to work, but neglecting this first step can have terrible long-term consequences. Look at it this way, you should be modeling for your client how to enter into a contractual relationship. Moreover, it’s a way of getting to know how your client thinks about money, which will greatly increase the likelihood that you will avoid getting stiffed.
It’s essential that you talk about the likely fees in realistic terms—before you send out any agreement for your client to sign. I recently went through the billing records of the twenty or so premarital agreements I’ve handled recently so that I could accurately tell my new clients what the realistic range of fees would be. Monetize each of the tasks involved in litigation. How many hours does a deposition (including preparation time) generally take? How long will the negotiation process likely be? Remind your client that outcomes are unpredictable, especially when you are dealing with disputes that could end up in litigation.
Craft your written agreement in user-friendly terms; again, with express discussion of likely fees and costs. If you aren’t able to have an in-person meeting or telephone call with the client before the agreement is sent out, talk about it in your next meeting so that you are confident that the client understands the terms. And confirm that your client has signed the agreement! Not surprisingly, it’s the clients who fail to sign agreements who are most likely to cause you problems later on. It’s not certain if this is the result of sloppiness on their part or a deliberate strategy to avoid liability for fees, but regardless of the reason, discovering three years later that the fee agreement was not signed, just as you are preparing for a fee arbitration, is a nasty experience you want to avoid at all costs.
Be open to discussing the fee arrangements with your clients. You need to hear about their financial condition, and if they can’t pay a retainer you want to know why so you can figure out a reasonable solution. Some clients want to discuss a sliding fee scale, or a cap on fees, and even if the answer is “no” you need to hear their concerns. Again, your goal is to be transparent, to be unafraid to talk about money issues, and to proceed with a clear sense of how you are going to be paid.
Don’t forget to update the agreement if circumstances change. Sometimes a simple email will suffice: You tell the client that you’ve retained a new expert and significant costs will be incurred, or you agree to defer payment for a few months while a settlement payment is being processed. But if there’s a major change—switching to a contingency fee or flat fee, for example—a newly-signed agreement is recommended. Remember, you are demonstrating that you take the money issues seriously, and that you are not afraid of talking openly about how the fees are going to be paid.
Frederick Hertz, an attorney and mediator based in Oakland, has managed his practice for more than 25 years.
"The Art of Getting Paid" is a one-year series of blog posts that provides a comprehensive training to lawyers on how to get paid.
We welcome your questions and comments – and of course, your suggestions on how to master this insufficiently respected aspect of practicing law.