How to Decide What Kind of Fee Agreement to Use - ABA YLD 101 Practice Series

By Reta A. McKannan

One of the most difficult things for new attorneys is developing a practice of discussing billing with a client or having an assistant explain to a potential client what will be expected in the way of compensation. If that practice of discussing the matter with the potential client isn't established from the outset, with every potential or new client, the financial success of the practice will always be in peril.

With that fact in mind, make 2007 the year you determine to take care of yourself as you take care of your clients. Plan to act, and act according to your plan.

Every activity or work performed for a client can be analyzed for billing, such as "X" dollars for a specific task, or "X" hourly rate for work that may take 24 months to complete, or some hybrid of the two. Compose or borrow from an experienced attorney, a fee agreement comprising the following:

The Contract

  • Exactly what task you will perform for the client
  • Whether the task will cost a specific amount of money or an hourly rate
  • Whether the fee will be paid in its entirety before work commences
  • Whether you will accept payments.
    • If you agree to accept payments, the dates on which payments will be made
    • How many payments will be acceptable as the fee is paid in its entirety
    • What will happen if payments are not made
    • WHAT WILL HAPPEN IS PAYMENTS ARE NOT MADE
  • What information you require from the client in terms of personal information
  • How often that information should be updated (if he or she moves, they will contact your office immediately)
  • Who else (friend, family) are entitled to call in the client's behalf (if the client is incarcerated)

Other Information for the Contract
While it isn't entirely necessary, one can include in the contract what information or progress reports will be made by the attorney as work progresses. Or, in the alternative, an informational document can accompany the client's copy of the contract showing what the client can expect of the attorney once an agreement is made. Whatever the information, the contract should control the arrangements with the client.

A retainer agreement, generally can also specify any other information the attorney requires, be it address and phone number of the client, or an emergency number, should the client need to be found immediately, the specific dates when fees will be paid and in what form, whether certified check, cash, or credit card.

Make the Client Understand You Would Withdraw
The attorney or his assistant should explain without hesitation during the early discussions with a potential client that the attorney will withdraw from representation if payments are not made on specified dates. With some clients, a phone call of reminder may be required. But calling should not become routine and there should be no hesitation to withdraw in the event the client declines to maintain his or her side of the agreement. In other words, if Client A is late with a payment, and the next month or pay date does not pay and makes no plausible explanation, then a notice of withdrawal should be prepared, filed with the Court and a copy sent to the client. Then, if the client wants to renew his or her agreement, a substantial payment toward representation - not just the previously-required payment - should be required for the attorney to become involved once again.

Unforeseen Always Happens
Some tasks appear to be short-term tasks, and they become long-term jobs. The retainer agreement should provide for a minimum retainer for the work done at the expected time and rate, and provision for an hourly rate to begin by a certain date if it is determined that the work will require longer than originally anticipated. These kinds of agreements are necessitated by the fact that many times clients represent a situation is one way, and investigation during the work reveals the situation to be different. Contracts for payment should be prepared to take those situations into consideration in advance - so the attorney isn't left to finish a case for nothing because he or she didn't anticipate the length of time required.

Resources

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About the Author

Reta A. McKannan, Esq., is the principal of Reta A. McKannan, P.C., in Huntsville, AL. Her practice consists of domestic relations, juvenile matters, criminal law, and assistants to individuals in personal matters as needs arise. She is a member of the ABA, the Alabama State Bar, the Huntsville-Madison County Bar Association, the Alabama Criminal Defense Lawyers Association, and is a certified guardian ad litem for children and families. She has served as chair of the Unauthorized Practice of Law Committee and the Law Day Committee of her local Bar Association, and was a charter member of the State Bar Association Leadership Forum in 2005. She is also active in the Foster Children's Alliance, a non-profit assisting the needs of foster children in Madison County.

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