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ARTICLE

Key Areas to Update in Your Fee Agreement

Jeanne M Huey

Summary

  • To protect your practice and build client trust, update your fee agreements. Your internal policies and procedures must then align with what you outline in the fee agreements, and everyone in the firm should follow them to the letter.
  • Fee agreements should define the scope of work; provide disclaimers for excluded services; and explain the need for a new, additional agreement to make revisions to the original fee agreement (including any increase in the scope of work).
  • Fee agreements should specify the primary contact for clients and the preferred mode of communication. They should also include a dispute resolution provision for fees and a process for handling disputed fees that is consistent with the ethics rules.
  • Lawyers have a duty to use new technology and know how it works. Fee agreements should keep clients informed about AI use. ABA Formal Opinion 512 specifies how the ethics rules apply to AI use.
Key Areas to Update in Your Fee Agreement
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The way we practice law constantly changes, and our fee agreements must keep up. A well-crafted fee agreement does more than outline how and when you get paid—it helps avoid disputes by setting clear expectations and aligning your practice with ethical obligations. Your internal policies and procedures must then align with what you outline in the fee agreement, and everyone in the firm should follow them to the letter. To start the year strong, consider reviewing and revising the key aspects of your current fee agreements (and updating any corresponding internal policies) to create consistency, avoid misunderstandings, and protect your practice.

Define the Scope of Work

Every case and client is unique, and your fee agreement should reflect that, particularly when defining the scope of work and providing disclaimers for excluded services. ABA Model Rule 1.2 allows lawyers to limit the scope of their work if the client understands and consents to the limits. Start by talking to the client about what they expect and what you can and cannot do for them. Then, ensure that your fee agreement clearly and precisely defines the scope to which you and the client have agreed.

In most litigation matters, there are tangential issues—often, they are tasks like tax advice, financial planning, or title searches—that you will not be handling for the client. If your job does not include these matters, say so in the fee agreement. Explicit disclaimers prevent scope creep and protect your practice by making it clear, in writing, what you are and are not doing for the client. Disclaimers also help protect you from liability in areas outside your expertise and avoid the risk that the client will “assume” that you are doing something for them that you are not and for which they need to hire another qualified professional.

Because circumstances change during litigation, your fee agreement should explain the need for a new, additional agreement to make revisions to the original fee agreement—including any increase in the scope of work. Resist the temptation to launch into a new project or expand your scope of work before you and the client agree on all aspects and document the change in a signed writing.

Address Client Communication

Regular, documented communication reduces the likelihood of disputes and is one of the best and easiest ways to satisfy clients. ABA Model Rule 1.4 requires that clients be informed about the progress of their matter, and the nature and timing of those communications should be an explicit part of your fee agreement. Customize the communication section of your fee agreement to fit your operations and let the client know whom to email, call, or text when they have questions or want to set up a meeting.

Some practice areas depend on paralegals for most client communications. If that’s the case for your practice, ensure that your clients know this by including it in your fee agreement. Additionally, if you (or your clients) prefer to communicate primarily via text message, ensure that your fee agreement reflects this method of communication. Clearly outlining how clients can contact you or your team for questions or updates provides clarity, fosters trust, and gives clients peace of mind.

Describe How Fee Disputes Will Be Handled

Your fee agreement should address how billing disputes will be resolved. Include a dispute resolution provision for fees, whether arbitration, mediation, or direct negotiation. Check the current law in your jurisdiction to ensure that your dispute resolution provision will hold up in court.

Your fee agreement should include a process for handling disputed fees that is consistent with the ethics rules. ABA Model Rule 1.15(e) requires disputed funds in the lawyer’s hands to remain in a trust account—such as an IOLTA—until the dispute is resolved. Be transparent about this requirement so that clients know what to expect if a billing issue arises or a third party with a recognized claim materializes with regard to the money held in trust. Emphasize that undisputed funds will be promptly distributed.

Explain Your Use of AI Tools

We have a duty to utilize new technology in our practice, and our clients expect us to do so. Under ABA Model Rule 1.1, comment 8, that duty includes knowing how technology works as part of our required competence.

To keep clients informed about new technologies in your practice, update your fee agreement to specify when and how artificial intelligence (“AI”) will be used in their case. Fulfill your duty of competence by taking the time to understand how your AI tools handle client data, and ensure that they meet the highest security standards.

Some uses of AI in legal practice pose risks, so addressing these concerns in your fee agreement is essential. To do this effectively, you must understand not just how the ethics rules apply to AI use (ABA Formal Opinion 512 should be a mandatory read for all lawyers on this topic) but also the ins and outs of any court or local rules regarding AI use and its disclosure that may apply to a client’s case, how AI works in different contexts, and the specific capabilities of the tools that you use. Train your staff to comply with all of the ethics rules regarding AI, and write down your firm’s policies on such use.

Two key aspects of AI use involve the duty of confidentiality under ABA Model Rule 1.6. First, under Formal Opinion 512, lawyers must obtain a client’s informed consent before entering any “information relating to the representation” into self-learning AI platforms (such as ChatGPT or similar tools). Address this in your fee agreement by disclosing that client information will not be input into any such tool without the client’s written “informed consent.”

Second, any AI tools that your office uses within closed, secure systems—such as legal billing software, timekeeping tools, and document management platforms—should be disclosed to the client. These systems are designed to protect confidential information and ensure that data for each client and matter remains separate and secure. Let the client know that you are using them and that your protocols regarding AI meet all of the required security procedures and mandates.

Align Your Practice with Your Promises

Your fee agreement is a commitment—not just about how and when your client will pay but also about your services for the client. As you expect your client to pay as promised, everyone at the firm must follow your policies and procedures and conduct business as pledged in the fee agreement. By following through on the commitments in your fee agreement, you create transparency, build trust, and establish a strong foundation for a successful and lasting working relationship with your clients.

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