Ten Tips for Drafting Engagement Letters
Brian S. Faughnan is a partner with Adams and Reese LLP, in its Memphis office. He can be reached at email@example.com.
Other than in a smattering of jurisdictions and certain specific engagements (like contingent-fee cases), by and large, an attorney agreeing to represent a client is not ethically obligated to draft and send that client an engagement letter setting forth the terms of representation. Thus, for most lawyers, whether to send an engagement letter is a question of prudence, not ethics. Nevertheless, sending an engagement letter can allow both you and your client to better understand the scope of your ethical obligations with respect to that engagement. Below are ten tips for drafting engagement letters.
10. Not everything is negotiable. Although you can use your engagement letter to memorialize an agreement and limit the scope of your engagement, any limitation still must be reasonable under the circumstances. If your client has agreed to pay you an unreasonable fee, memorializing that agreement in an engagement letter will not transform the unreasonable fee into a reasonable one.
9. The truth, the whole truth, and nothing but the truth. Make certain that what your engagement letter says about you and the services you intend to perform is true. Avoid making false or misleading communications about yourself or your services.
8. Know your audience. Well-crafted engagement letters serve to protect the lawyer from liability exposure that can result from actual or manufactured client misunderstandings. The best engagement letters are understandable both by the primary audience (the client to whom the letter is addressed) and the secondary audience (judges, juries, or bar counsel who will be reviewing it if the complaint is filed).
7. The devilish details. A form engagement letter can only take you so far. Often, the most crucial part of an engagement letter is the description of what you are being engaged to do. You will want to make sure both to define the scope of the matter for which you are being engaged and to identify any specific limitations that have been agreed upon regarding what the client expects you to do.
6. But I thought I was only representing one of the Musketeers. If no other reason provided here is enough to convince you that sending an engagement letter would be helpful, perhaps this one will: an engagement letter will likely serve as your best opportunity to avoid any confusion about exactly who is, as well as who is not, your client. Nothing can ruin your day like receiving a motion to disqualify claiming you have a conflict that prevents you from being adverse to someone you never thought was your client.
5. No, no. I mean a “true” retainer. Assuming you are ever lucky enough to find a client who will pay one, the terms of a “true” retainer agreement can be spelled out nicely in an engagement letter. Likewise, if what the client is really paying you is an advance to be held in trust and applied to pay fees earned in the future, your engagement letter is the perfect place to spell out the terms under which you are holding that money.
4. You Jane. Me not your lawyer. A nonengagement letter (i.e., an “I’m not your lawyer” letter) is a handy device for memorializing the fact that you have not undertaken to represent anyone in a particular matter. Be careful when sending such a letter not to end up having your nonengagement letter accidentally turn its recipient into your client. (Telling someone “A two-year statute of limitations applies to your potential claim” is, after all, the provision of legal advice.)
3. It’s not me; it’s you. A disengagement letter (i.e., an “I’m no longer your lawyer” letter) is another helpful tool. The act of sending a disengagement letter, while not likely to increase the chances of you getting paid any outstanding accounts receivable, will serve to transform its recipient from a client to a former client and to change your obligations to avoid conflicts of interest with the recipient.
2. Ch-ch-ch-ch-changes. Engagements change over the course of time. New parties get added to lawsuits, new potential lenders show up in deals, and lawyers get asked to take on additional legal responsibilities. When the nature of your engagement changes, send your client an updated engagement letter.
1. Paving the road with good intentions. If you actually say in the letter that the client needs to sign and send it back, you better follow up and get a signed copy back. When a lawyer gets in a dispute with a client about the lawyer’s obligations to that client, the only thing worse than not having sent an engagement letter is having an unsigned engagement letter that says the client is supposed to sign it to show agreement with its terms.
- The Essential Formbook, Volume I: Partnership and Organizational Agreements/Client Intake and Fee Agreements. 2003. PC # 5110424V1. Law Practice Management Section.
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