Undertaking a partnership with an attorney may not always be a straightforward matter. Even in the simplest cases, it’s crucial to be clear about fees and expectations. Retainer agreements help clarify and formalize the roles and obligations of both attorney and client.
Retainer agreements may come in different forms or length. The character of the agreement depends on the client and the attorney’s negotiations. Understanding retainer agreements can help you navigate your side of the discussion.
What is a retainer agreement?
A retainer is defined as a fee that a client pays upfront to an attorney before working for the client. A retainer fee helps secure the services of the attorney and shows a willingness on the part of the client to hire and cooperate with the lawyer.
As such, a retainer agreement is a formal document outlining the relationship between an attorney and client. It details the different obligations and expectations involved, which can include ethical work principles, retainer fees, modes of communication, and professional ground rules.
In most cases, these details are discussed together before the finalization of the agreement. Both the client and the attorney have the right to negotiate the terms of the legal relationship.
There are generally three types of retainer today.
A general retainer contracts the services of an attorney for a specific period. The client essentially pays for the availability of the lawyer, or at least, for their preferential attention within that time. They can expect their services when called.
A retaining fee agreement is commonly used today. Clients pay a deposit or lump sum fee in advance and place it in a separate trust account. The lawyer withdraws from the account every time he performs work.
The retaining fees are not generally intended to cover the entire cost of the representation. The lawyer refunds the client any leftover amount in the trust account at the conclusion of the retainer agreement.
Finally, a special retainer is a flat fee for a specific case or project. It includes criminal cases and drafting of wills.
Retainer agreements vary in length and style. However, there are essential parts of a retainer agreement which you can typically expect, regardless of jurisdiction or type of case.
The essential parts of the agreement include:
- Scope and nature of the work
What is the attorney expected to do for the client? There is a difference between the requirements of a corporation looking for a lawyer to draft contracts, and an individual trying to win a custody case. The retainer agreement can also detail actions that the attorney will not do.
- Retainer fee
The retainer fee is the amount charged to the client. The agreement must show the basis of the fee in detail. When appropriate, specific examples can be written down. For example, this includes flat fees for certain cases or projects.
- Client expenses
The client typically pays for some expenses, especially filing-related expenses and travel costs. The retainer agreement should specify costs that the client will have to pay regardless of the outcome of the case.
Aside from these essential parts of a retainer agreement, the document can also go in-depth about other aspects of the legal relationship. Adding relevant clauses helps prevent disputes later.
You could other clauses in simple and clear language. If you’re working with the attorney for the first time, it is better to be as exhaustive and comprehensive as possible. Additional terms may include:
- Means for fee arbitration, in case of a dispute
- Expectations towards the client, in terms of cooperation and communication
- Right to withdraw by the attorney
- The client’s right to terminate the retainer agreement
- Intention to use an associate, paralegal or contract lawyer for additional services and expenses
- No guarantee of the result
- Conflict checks
In the vast majority of legal cases, lawyers already have a standard retainer form ready. However, it is always better to read through the details. Clients have the freedom to negotiate the retainer agreement and even to refuse it.
Is a retainer agreement required?
Generally speaking, many jurisdictions require, or at least highly suggest, retainer agreements in writing.
However, no laws require retainer agreements for clients and attorneys undertaking a general retainer relationship. This is true especially if a similar kind of service has been rendered to and paid for the client already.
As stated in the Rules of Professional Conduct, the details of the agreement should be communicated to the client, in writing, when the lawyer has not regularly represented the client. These details include the scope of the representation and the expenses for which the client is responsible. Otherwise, having communication in written form is merely “preferable.”
In any case, the best practice is to reduce agreements to written form every time.
Who uses retainer agreements?
Ideally, all clients entering a legal relationship with an attorney should have a form of retainer agreement reduced into writing.
Many different types of cases would benefit from a retainer agreement. For example:
- Criminal charges
- Civil cases
- Divorce, custody, and family law
- Personal injury and medical negligence
- Businesses and freelance worker representation
- Drafting contracts
What are the benefits of having a retainer agreement?
First of all, having a retainer agreement guarantees you availability and access to your ideal representation of choice. You can set hours each month for specific services, or pay until the case is concluded. On the other side of the coin, a retainer agreement ensures a stream of income for the attorney.
A retainer agreement is also useful in budget planning. You can estimate your short-term and long-term expenses based on the terms you have agreed upon and the approximate duration of your case.
What are the disadvantages?
The chief disadvantage of having a retainer agreement is the risk of paying for unused services. You are essentially paying a type of carrying a cost for services that may remain on the shelf indefinitely. It often happens in cases when there are minimal to no legal disputes needing representation. In this type of scenario, you may be better served by a one-time flat fee or a service-based retainer, instead of keeping constant hours and regular access.
You may also find the upfront costs to be prohibitively expensive.
What are the fees in retainer agreements?
Before anything else, lawyers are ethically bound to set fees which are reasonable and grounded on certain factors. The basis for the fees may be any of the following:
- Time and labor required to investigate and represent the case
- Fees customarily charged for similar cases of the same complexity in the locality
- Time limitations faced by the legal team
- Nature of the professional relationship, including the length
- Expertise, reputation, and competence of the involved attorneys
- Coordination and additional logistical costs
There are also three basic types of attorney fees or compensation agreements:
A contingency fee a compensation calculated as a percentage of the amount recovered by the client, particularly in personal injury cases. Negligence and accident cases normally charge based on contingency fees.
The contingency fee typically ranges from 25 to 40% of the gross amounts that the client won from the case or achieved as a favorable settlement. A good starting point is 33% of the total after all deductions.
Other expenses incurred throughout the case, such as court fees and copying costs, are usually paid for by the client. The contingency fee is, therefore, computed after necessary deductions.
A variation of this type, called the modified contingency fee, combines a reduced contingency fee percentage and a reduced hourly rate. The compensation most suited for your retainer agreement depends on your capacities.
The second type of fee is the hourly fee. This type has the potential to be more effective than its value, as you run the risk of paying for a lot of overhead costs.
Aside from the overhead costs maintained by the attorney, the hourly fee can also depend on the subject area, the attorney’s level of expertise, and the complexity of the case. If there is potential risk or liability to the attorney as part of the case, then that can raise the hourly fee.
Finally, criminal cases, drafting of a will, and incorporation typically uses a flat fee in retainer agreements.
Having a formal document that details the expectations and obligations of both attorney and client protects both parties financially and legally. The clarity ensures better cooperation and communication as the case progresses.
There are many different types of retainer agreements and fees that you can discuss with your lawyer. The best form of retainer agreement depends on the case, the parties involved, and the necessary costs and obligations. Ultimately, the benefits of having security and confidence in your legal representative outweigh any disadvantages of having a retainer agreement.