Sample Engagement Letters and Fee Agreements

By P. A. Henrichsen

Editor’s Note: Every first-year law student learns the essentials of contract law—an offer, acceptance of the offer, a lawful object, and consideration. By the time many law school graduates are out in practice, the essentials about a meeting of the minds, mutual consideration, performance, and delivery vaporize amid the everyday exigencies of day-to-day practice. Between marketing a practice, memorizing the latest amendment to the Federal Rules of Evidence, and going to trial, a vital step must be taken between lawyer and client, and that’s the engagement letter and fee agreement. The agreement memorializes the terms of hire.

What is an engagement letter? It’s a document directed to the client, signed by both lawyer and client, reduced to writing, setting forth the exact duties of the law firm, the lawyer, and the client. The agreement identifies what the lawyer will—and won’t—do for the client. Generally created after the initial conference with the client, during which a tentative agreement has been reached, the engagement letter identifies the nature of the problem (e.g., a criminal case or personal injury matter), names the expected adverse parties, and may set forth the date of the incident to serve as a trigger for statutes of limitation. Setting the parameters of the attorney-client relationship, it can define when it begins and when it ends, what happens during the process, and even how materials received by the law firm will be stored and destroyed.

It’s about the money, honey, describing how fees will be set (e.g., an hourly rate, a flat fee, a contingent fee, etc.), what other expenses will be paid, an estimate of the fees, a deposit of funds, how withdrawals from a trust account will be made, and what happens when the till runs dry. If someone other than the client has agreed to pay the fee, then a separate agreement to guarantee payment of fees is necessary. The agreement can provide how fee disputes will be settled, even providing an escape clause permitting the lawyer to withdraw if fees aren’t paid.

The agreement can outline the obligations of both the client and the lawyer. The lawyer can agree to promptly return all phone calls within 24 hours, correspond on a regular basis about the progress of the case, and provide court decisions promptly. The client may agree to promptly return all phone calls, respond to all correspondence, cooperate with the lawyer, meet with the lawyer when requested, and advise the lawyer of any changes in his or her situation. Clients rarely retain lawyers for unimportant, insignificant, paltry matters, so the engagement letter should be treated with at least as much importance as that given to the purchase of an engagement ring or new car. Give the client the opportunity to think about the engagement letter overnight. Answer any additional questions the client may have. Provide a duplicate of the signed agreement to the client.

Just as important are non-engagement letters to send a clear signal to the would-be client that the lawyer isn’t representing him or her. The non-engagement letter can take many forms—for situations ranging from “We’ve researched and examined your case, but we’re declining to take it,” to a conflict of interest, to “We haven’t heard any more from you since the time you dropped by the office.”

The disengagement letter is used when a lawyer wants to leave the relationship for some reason, mostly commonly nonpayment of fees. A letter declining further representation warns a client who’s dropped from the radar that the lawyer will be closing the file unless he or she hears otherwise, and it also warns the client that deadlines may loom. When the purposes of the engagement letter have been fulfilled and the job’s done, a closing letter finishes off the relationship and officially closes the file, telling the client what happened and how the files will be stored.

While there’s no set format, an engagement letter should leave nothing to memory or chance. Not only invaluable protection in case of ethical complaints, it also shows the client that you take your relationship with the client seriously.

In the pages that follow, P.A. Henrichsen, a lawyer in West Des Moines, Iowa, shares his form engagement, non-engagement, disengagement, and closing letters with you. Adapt these to your practice and your clients’ needs.

ENGAGEMENT LETTER AND FEE ARRANGEMENT

Dear (Name):

Pursuant to my conference of (date), I have agreed to represent you in connection with (type of matter) [or] [in which we discussed (type of problem)], and we agreed to (insert appropriate details).

At this time, I want to thank you for selecting my law firm to represent you in this matter. I also wish to set forth our agreement as to payment of my fees. My fees for legal services are $(fee rate), plus any expenses that may be incurred, such as filing fees, deposition charges, copying costs, postage, and related expenses. My office will bill you approximately monthly depending upon the amount of work that was done on your file during that period of time. At this point in the case, it is difficult to estimate the amount of time and expense that will be necessary to adequately represent you in this case. However, as we discussed, I estimate the fee will be approximately $(dollar amount). I will also advise you before undertaking any procedures that will substantially increase the amount of fees. Please remember this is an estimate and may be subject to change.

You have deposited $(dollar amount) with my firm for fees and costs. My firm will hold your funds in my Lawyers’ Trust Account. I will provide you with a monthly statement of fees, costs, and expenses. After my office mails you the monthly statement, my staff will apply the funds to the fees earned, costs, and expenses incurred. You are also responsible for paying fees, costs, and expenses in excess of the funds that we hold. Should we exceed the retainer, we may bill you monthly for additional fees and expenses. Payment must be made within 30 days. We reserve the right to withdraw should these bills not be paid. Further, we may ask that additional sums be deposited in our trust account should it appear necessary to cover additional fees and expenses.

I may send you pleadings, documents, correspondence, and other information throughout the case. These copies will be your file copies. Please retain them. I will also keep the information in a file in my office, which will be my file. Please bring your copy of the file to all of our meetings so that we both have all the necessary information in front of us. When I have completed all the legal work necessary for your case, I will close my file and return original documents to you. I will then store the file for approximately (number of years) years. I will destroy the file after that period of time unless you instruct me in writing now to keep your file longer.

I have included a copy of this letter for your review, signature, and return to me in the postage-paid envelope. If any of the information in this letter is not consistent with your understanding of our agreement, please contact me before signing the letter. Otherwise, please sign the enclosed copy of this letter and return it to me.

On behalf of the firm, we are happy to represent you in this matter. If you have any questions, please contact me at your convenience.

Very truly yours,

______________________
(Your name)

 

I have read this letter and consent to it. Furthermore, I grant and give my informed consent after (your name) has proposed the course of conduct, has communicated adequate information, and has explained all material risks of and reasonable available alternatives to the proposed course of conduct.

 

__________________________________
(Client name) Date

NON-ENGAGEMENT LETTER

Dear (Name):

This letter is to confirm that I will not represent you in the (insert subject) matter. Since I am not currently representing you on any matter, we will not be able to monitor changes in the law or your circumstances that may affect the strength of your case. Neither will my law firm.

Important time limits are (could be) involved in processing your case. I urge you to contact another lawyer immediately if you wish further advice or to pursue your case for relief. Your failure to proceed promptly may result in your legal matter being forever barred by a time limit.

If you wish to have a lawyer represent you and you do not have another lawyer in mind, I suggest you call the (insert the name of your state bar Lawyer Referral Service), which maintains a list of lawyers who may be able to handle your case. Their phone number is (insert your local LRS phone number).

Thank you for contacting my law firm. I hope to be of service to you in the future.

Very truly yours,

______________________
(Your name)

NON-ENGAGEMENT LETTER
AFTER REVIEW

Dear (Name):

You have contacted my firm and requested that I evaluate whether I will represent you in a claim you wish to make against (insert appropriate name(s)). I met with you yesterday and have reviewed various documents you left with me. I enclose those original documents for your file. I have retained photocopies for my file.

I am unable to represent you in this matter at this time. However, if you have a need in the future for legal assistance, I hope you will consider my firm. I appreciate being given the opportunity to review this matter.

The passage of time may bar you from pursuing whatever, if any, claim you may have against (insert appropriate name(s)). Because time is always important, and could be critically short in your case, I recommend that you immediately contact another attorney for assistance if you wish to pursue your claim. If you do not have another attorney in mind, I suggest you call the (insert the name of your state bar Lawyer Referral Service), which maintains a list of lawyers who may be able to handle your case. Their phone number is (insert your local LRS phone number).

In declining to undertake this matter, I am not expressing an opinion on whether you will prevail if a complaint is filed. I encourage you to seek a second opinion if you wish to do so. You should not refrain from seeking legal assistance from another attorney because I am unable to represent you in this matter. Please contact another attorney of your choice.

I am not charging you for any legal fees or expenses on this matter and at this time. My policy is to charge for evaluating cases only when I express an opinion on the merits of the case to the client. Since I am not expressing an opinion about your case, I am not charging you.

Thank you again for the opportunity to meet with you and review your case. If you have any questions about this letter or any other issues, please contact my firm.

Very truly yours,

______________________
(Your name)

NON-ENGAGEMENT LETTER
(FOLLOW-UP TO INITIAL INTERVIEW)

Dear (Name):

At this time, I want to thank you for consulting my law firm to discuss (insert problem).

I require that you pay $(dollar amount) before I will begin work on your case. (If applicable, explain time limits that are involved in the case and how legal rights may be jeopardized if the case is not properly pursued). When you deposit the funds, I will hold your funds in my Lawyers’ Trust Account. I will provide you with a monthly statement of fees, costs, and expenses. After my staff mails you the monthly statement, I will apply the funds to fees earned, costs, and expenses incurred. You are also responsible for paying fees, costs, and expenses in excess of the funds that we hold.

At this time, I will do nothing further until I hear from you. I do not represent you on your legal matter at this time as you have not paid my retainer fee. I am happy to provide representation upon receipt of the funds referred to above.

If you have any questions, please feel free to call.

Very truly yours,

______________________
(Your name)

I have read this letter, understand, and agree with it.

__________________________________
(Client name)            Date

NON-ENGAGEMENT LETTER

Dear (Name):

Pursuant to my letter of (date), I conducted (legal research or investigation) to determine whether or not you have a claim that could be asserted against (insert appropriate name(s)). The result of my (research/investigation) indicates a strong likelihood that there is no enforceable legal basis for maintaining an action against (insert appropriate name(s)).

[Optional Paragraph: My opinion is based upon my preliminary research; however, I have found (insert number of cases) cases that support my conclusion.]

I urge you to consult another lawyer if you wish a second opinion. Time limitations may affect your right to pursue a claim, if any; therefore, you should act promptly in consulting another lawyer or otherwise pursuing your claim. If you wish another attorney to review this matter and you do not have another attorney in mind, I suggest you call the (insert the name of your state bar Lawyer Referral Service), which maintains a list of lawyers who may be able to handle your case. Their phone number is (insert your local LRS phone number).

Since I am unable to proceed on your behalf, I am returning your original documents to you. We have retained photocopies for our records.

Thank you for your interest in my firm. If you have need for legal assistance in the future, I hope you will consider my firm.

Very truly yours,

__________________________________
(Your name)

 

I have read this letter, understand, and agree with it.

__________________________________
(Client name)         Date

FEE AGREEMENT FOR DEFENSE IN CRIMINAL PROCEEDINGS

THIS AGREEMENT is made and entered into this (date) day of (month, year), by and between the law firm of (your law firm name), hereinafter referred to as “law firm” and (client name(s)), hereinafter referred to as “client(s).”

WITNESSETH:

WHEREAS, the law firm is a limited liability partnership of regular practicing attorneys located in (county, state) and certain members of said law firm represent Defendants in criminal proceedings, and

WHEREAS, the client(s) may be or has/have been charged in the (district, county, state) District Court with the crime of (specific offense), and

WHEREAS, the client(s) is/are desirous of hiring said law firm to prevent the filing of said charges and/or to defend him/her/them on said charges(s).

NOW, THEREFORE, the client(s) and law firm do hereby mutually agree that the law firm shall represent the Defendant in connection with the criminal matters above referred to.

Client(s) agree(s) to pay law firm a retainer fee of $(dollar amount) for representation in connection with the above set forth matters. Said retainer fee $(dollar amount) shall be paid on the (date) day of (month, year) and $(dollar amount) on the (date) day of each month thereafter until paid in full. That representation shall be provided at the rate of $(dollar amount) per hour with the retainer charged for such representation to be the retainer fee as agreed above.

Amounts paid as retainer fee shall be initially deposited in law firm’s trust account, in the client’s name. Client(s) agree(s) that law firm may, on the 10th and 20th day of each month, withdraw from said account and retain as fees an amount commensurate with the work performed to date by law firm on client’s behalf. Client(s) will be provided with a monthly statement of said withdrawals.

Client(s) further agree(s) that in the event said retainer fee has been exhausted prior to the completion of representation that the law firm shall thereafter render a monthly bill for services rendered at the aforesaid hourly rate and that the same shall be promptly paid by client. Law firm may withdraw as counsel for client if fees are not promptly paid.

Client(s) further agree(s) to pay the law firm on a monthly basis all out-of-pocket expenses advanced by law firm on client’s behalf. Said funds will not be paid from the funds in the trust account set aside for attorney’s fees. Funds for out-of-pocket expenses may be established in a separate trust account for that purpose or paid promptly when billed by law firm on a monthly basis as agreed by the client(s) and the law firm. Said out-of-pocket expenses shall include but not be limited to copying costs and costs of experts, reports, records, and mileage at the IRS rate.

In the event client(s) desire(s) that law firm withdraw from legal representation or law firm withdraws from said representation and the retainer fee has not been exhausted, the law firm shall be entitled to such portion of said retainer fee as shall be commensurate with the work performed to date by law firm for client(s). Any amounts remaining shall be refunded by law firm to client.

__________________________________
(Your law firm name)

By: _______________________________
(Your name)

__________________________________
(Client name) Date

__________________________________
(Client name) Date

COMPENSATION AGREEMENT (CONTINGENT FEE)

THIS AGREEMENT is made and entered into this (date) day of (month, year) by and between the law firm of (your law firm name), hereinafter referred to as “law firm” and (client name(s)), hereinafter referred to as “client(s).”

WITNESSETH:

WHEREAS, the law firm is a firm of regularly practicing attorneys located in (county, state), who engage in litigation involving personal injury and property damage, and

WHEREAS, client(s) believe(s) that (s)he may have claim or cause of action for personal injury and/or property damage against (insert appropriate name(s)) or any other person, firm, or corporation that may be liable thereto resulting from an incident that occurred on the (date) day of (month, year).

WHEREAS, the client(s) is/are desirous of hiring said law firm to proceed against said Defendant(s), or some of them, or any other person’s legal entities or insurers against whom a recovery might be obtained, as determined by the discretion of said law firm.

NOW, THEREFORE, the client(s) and law firm do hereby mutually agree that the law firm will proceed as it shall deem appropriate to effect a recovery for any and all personal injury and/or property damage that has been sustained by client(s).

Client(s) shall, upon the signing of this Agreement, pay to law firm the sum of $(dollar amount) that shall be applied upon account for expenses as needed, to obtain photographs, hospital reports, to secure records and documents, to pay the costs of medical examinations and reports, fees for expert witnesses, and the costs of service of notice of suit and filing of Petition. Law firm may demand from time to time, and client(s) shall pay such, additional sums as shall be necessary to pay said expenses. Any expense fund balance shall apply on law firm’s fees; however, such balances so applied, unless hereinafter otherwise set forth, shall be considered in determining the percentages hereinafter referred to.

Client(s) further agree(s) that, in addition to the expenses or including the expenses referred to in the preceding paragraph, or if not otherwise paid, the client(s) will pay in advance all out-of-pocket costs of suit, including any and all costs of suit, including any and all costs as may be necessary for the opening of an Estate, Guardianship, or Conservatorship, as herein after set forth, and all out-of-pocket expenses to discover, preserve, and present evidence, to prepare for trial, and client(s) further agree(s) to pay all reasonable incidental expenses, including reasonable and necessary travel costs. Client(s) agrees(s) to pay all said fees promptly at the request of the law firm.

Client(s) and law firm further agree that, in the event of recovery, such expenses as hereinabove referred to, not already paid, shall be paid by client(s) from his/her/their share of the proceeds as hereinafter set forth.

In the event of recovery, the amount of recovery shall be used as a basis for compensation as hereinafter specified depending upon the point of time at which settlement is made. Said attorney(s) shall receive an amount equal to thirty-three and one-third percent (331/3%) of said recovery in money or property if effected by settlement made after service of notice of suit and up to the time of the beginning of the selection of the jury in said trial; an amount equal to forty percent (40%) of the recovery if made at any point between the beginning of the selection of the jury and the final decision of the jury; an amount equal to fifty percent (50%) thereafter, including Appeal to the Supreme Court of (your state) if appeal is taken thereto. Should said attorney(s) select the Federal Court or the Court of another state as a forum, then a similar or analogous schedule of compensation shall govern, with the first Court of Appellate jurisdiction to be construed as the Supreme Court.

Client(s) and law firm further agree that law firm may at its own expense employ another attorney, or attorneys, in such place or places as may appear desirable to assist in the above matter. If client(s) employ(s) another attorney, or attorneys, in this matter, such employment shall be at the client’s expense and shall not affect the amount due law firm under this contract. If client(s) should settle or collect his/her/their claim himself/herself/themselves, such fact shall not affect the amount due law firm under this agreement. Client(s) agree(s) that any settlement of this claim shall be made through and at the offices of said law firm.

Client(s) and law firm further agree that, in the event the proper prosecution of this case requires proceedings in an Estate or Guardianship, the law firm herein shall in addition to the contingent fee herein agreed upon, be reasonably compensated for such services in the event of recovery as allowed by the Court and provided by law. Should there be no recovery, client(s) shall pay to the law firm such reasonable amount for opening and closing such Estate or Guardianship as allowed by the Court and as provided by law.

Client(s) and law firm further agree that all sums due herein shall be paid at the offices of (your address).

Client(s) and law firm further agree (insert as needed).

Client(s) and law firm further agree that except as may be heretofore set forth or as provided by law for the administration of assets other than this lawsuit, said attorneys shall receive no compensation for services rendered under this Agreement if there is no recovery of money and/or property.

Signed and dated at (your address) on the date first above written.

__________________________________
(Your law firm name)

By: _______________________________
(Your name)

 

_________________________________
(Client name) Date

__________________________________
(Client name) Date

LETTER AWAITING FURTHER INSTRUCTIONS

Dear (Name):

This will confirm our discussion regarding (insert subject matter) on (date). I advised you (insert advice given).

At this time, you have not decided whether you wish to proceed further in this matter. I will not be representing you until you advise me that you wish to proceed and you send me the following documents: (insert needed documents) and make satisfactory arrangements for payment of expenses and my legal fees.

Please note that time limits may apply to your claim. If you wish to proceed with your claim, it is important to act immediately or you may be barred by a time limit and you will not be able to pursue any action to recover damages or other relief you have requested.

If I have not heard from you within 30 days, I will assume you do not wish to proceed and I will close my file.

Very truly yours,

_______________________________
(Your name)

GUARANTEE OF PAYMENT OF FEES

I (We) (guarantor(s)) on this (date) day of (month, year), in consideration of law firm’s representation of the above-named client (client name), pursuant to the above and foregoing written Agreement, do hereby guarantee to the law firm that all fees to be paid to law firm pursuant to said Agreement not paid by client will be paid by the undersigned in the same manner and amount as required of client in said Agreement. Undersigned acknowledges receipt of a copy of the Fee Agreement with the client and of this Agreement.

THE UNDERSIGNED FURTHER ACKNOWLEDGES THAT THE LAW FIRM IS ENGAGED IN REPRESENTING THE CLIENT, NOT THE GUARANTOR, AND THAT ITS FIRST AND SOLE RESPONSIBILITY IS TO REPRESENT THE INTEREST OF THE CLIENT.

__________________________________
GUARANTOR

__________________________________
GUARANTOR

DISENGAGEMENT LETTER: UNPAID FEES

Dear (Name):

In the past, it has been my pleasure to serve you as counsel in (subject matter title). In the course of that representation, you have paid my firm $(dollar amount already paid) in legal fees and expenses. Unfortunately, contrary to our engagement agreement, you have not paid our statements in a timely matter for the past few months.

At this time, the outstanding and overdue fees and expenses total approximately $(dollar amount). My firm desires to continue our relationship but will not finance your case. Moreover, you expressly agreed that the hourly fees and expenses in this matter would be kept current.

I have continued to represent you for the past (time), even though each month the outstanding fees and expenses increased. I did so because I value our relationship and would like to continue representing you.

At this point, in my opinion, the Trial Court will permit me to withdraw. There is still sufficient time for you to retain other counsel without jeopardizing your case or adversely affecting the Court’s calendar. However, if we wait several more months, it is possible that one of these conditions for withdrawal may not exist.

Your new counsel may wish to discuss this case with me. That would be to your advantage both substantively and economically. I am willing to do so as long as satisfactory arrangements are made to compensate me for the additional time and expense that will be incurred. In addition, it will be necessary to agree on a plan to gradually reduce the outstanding fees and expenses. I also have certain work product that has been generated in the past. I am willing to share it with your new counsel to the extent my legal obligations require me to do so in the absence of full payment of my fees and expenses.

I enclose a Petition for Withdrawal that I plan to file with the Court 14 days from the date of this letter. In the meantime, if you wish us to continue representing you, I would be pleased to do so if satisfactory arrangements are made to take care of the outstanding and overdue fees and expenses, as well as to take care of the future fees and expenses. I look forward to hearing from you and remain hopeful the representation can continue.

Very truly yours,

_______________________________
(Your name)

SEPARATE AND ADDITIONAL AGREEMENT

Client and law firm agree that any controversy or dispute regarding fees hereunder shall be resolved by the (insert district) JUDICIAL DISTRICT FEE ARBITRATION COMMITTEE and that the decision of the Committee shall be binding upon both client and law firm. It is understood by the client that in agreeing to arbitration as to all matters that may be asserted or claimed to be asserted by client against the law firm concerning fees, that client is giving up his or her right to a jury or Court trial, except for the rights of judicial confirmation, vacation, and appeal contained in the Chapter 679A of the Code of Iowa (or as appropriate for your jurisdiction).

__________________________________
(Your law firm name)

By: _______________________________
(Your name)

 

__________________________________
(Client name) Date

ECLINING FURTHER REPRESENTATION

Dear (Name):

Since I have not heard from you for the past (30, 45) days, I assume you do not wish to retain me further or to proceed with this matter. For this reason, I am now closing my file and will take no further action in the matter.

You are (may be) facing some time deadlines. If you decide to proceed, you should contact another attorney immediately. If you fail to do so, your legal matter may be barred by a time limit and you will not be able to pursue any action to recover damages or other relief you have requested.

The (insert the name of your state bar Lawyer Referral Service) would be happy to assist you. Their number is (insert your local LRS phone number).

Very truly yours,

_______________________________
(Your name)

CLOSING LETTER

Dear (Name):

I wish to take this opportunity to thank you for allowing me to represent you in the (describe) matter. In order to complete this matter, I will (outline any final matters you will take care of). In addition, you will need to (outline everything the client is responsible for at this time).

[For dissolution of marriage cases, add the following: I again remind you to immediately make any beneficiary changes on your insurance and/or retirement plan benefits should you desire to do so. If your former spouse remains designated as a beneficiary, it is likely that (s)he will get the proceeds of such assets unless you designate a different beneficiary and sign the necessary forms to complete the transaction.]

Since this matter is now closed, I suggest that you keep all information relating to the matter in a safe place where you can easily locate it. I am closing my file and I am returning your original (records, documents) related to your case. As we discussed in our initial interview, my firm will store your file for (number of years) years from now. The file will then be destroyed unless you request that we store the file for a longer period of time. If you wish me to store the file for a longer period of time, you must instruct me to do so in writing within five days of the date of this letter.

We hope this matter has been concluded to your satisfaction. Thank you for allowing us to represent you in this matter. If we can be of further assistance on this or any matter, please let us know.

Very truly yours,

______________________
(Your name)

P. A. Henrichsen practices with McEnroe Law, P.C., in West Des Moines, Iowa. He can be reached at . This article originally appeared as a presentation at the Iowa State Bar Association 2006 Solo and Small Firm Conference, © 2006 P. A. Henrichsen and Iowa State Bar Association. Reprinted by permission.

Copyright 2007

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