What is a Lawyer Retainer Agreement?
A Lawyer Retainer Agreement is a document that spells out the agreed upon terms between an attorney and a new client. In most engagements with a new client, a Lawyer Retainer Agreement is used to create the attorney-client relationship. Lawyer Retainer Agreements are subject to state and local laws.
Lawyers typically charge for their services based on their time, which may be divided into tenths, quarters or other increments. A Lawyer Retainer Agreement may specify how much the lawyer will charge for various tasks and the lawyer may charge in accordance with the Lawyer Retainer Agreement. If the Lawyer Retainer Agreement says that the lawyer’s hourly rate is $225 per hour and that the lawyer is being paid a retainer in the amount of $1,500, the lawyer will bill against the retainer at the rate of $225 per hour until the retainer is exhausted .
Conversely, the Lawyer Retainer Agreement may state that the retainer is a flat fee for a defined scope of work. For example, it may state that the retainer is $3,000 for completing the engagement letter, attending closing and delivering loan proceeds.
A Lawyer Retainer Agreement usually specifies the scope of the work. For example, it may state that the lawyer is being retained to represent the client in a criminal matter and such additional matters as may from time to time be agreed upon by the parties.
A Lawyer Retainer Agreement may also specify what will happen if the client fails to pay or does not allow the lawyer to represent the client to conclusion.
Retainer Agreement Components
Most retainer agreements will set out the exact nature of the legal services to be provided by the attorney. The scope of work may be general (for example, representation of client in probate of decedent’s estate) or specific (for example, representation with respect to formation and organization of a series LLC). The scope of work should also be narrowed to include only those things that the client is specifically hiring the lawyer to do.
Some retainer agreements will expressly say that the lawyer has no obligation to take action on any issue that is not included in the description of the scope of work.
Another important aspect of a retainer agreement is the fee structure. This should be set out in clear terms. A flat fee retainer agreement may also provide that other fees are billable at one rate and that the retainer should be replenished hourly during the course of representation. Beware of retainer agreements that attempt to secure fees greater than what may be reasonable. For example, retainer agreements to create an LLC or to file a trademark with a $5,000.00 retainer should raise a flag that perhaps the attorney is using the retainer as an opportunity to charge excessive fees.
And of course, as with any lawyer-client agreement, the obligations of each party should be clear. In virtually every retainer agreement, the obligations are about the same: the lawyer should agree to perform the services set forth in the scope of work, and the client should be obligated to pay the fees. But you would be surprised how often the "binding" part of the retainer agreement clearly favors one side or the other. Practice pointers to add to your lawyering toolbox when reviewing retainer agreements are to think about how to assure both sides are "locked in" and cannot simply walk away from the deal, and to become very familiar with and enforceable of the remedies for breach of the retainer agreement.
Retainer Agreement Types
A retainer agreement is a contract between you and your client. There are several different types of retainer agreements that you can utilize, including a general retainer, special retainer, and contingent retainer. A general retainer is an upfront fee that your client pays in order to retain your services. You may specify in the agreement whether the general retainer will be applied to the attorneys’ fees or costs in order to avoid any disputes about whether the general retainer needs to be replenished. Generally, if the services are minimal in nature or the engagement will end before there have been significant billable fees incurred, a general retainer may be appropriate. This type of retainer can also be used in both civil and criminal matters.
A special retainer is pretty much what it sounds like. An attorney gets a specified amount, which is set "in stone," to perform a specific task. An example might be an attorney who is performing probate of a trust on behalf of a beneficiary. The attorney knows that this work will not exceed 20 hours total and has no other responsibilities other than to complete this task. Sometimes both the client and the attorney can agree that the case will have straightforward issues that lend themselves to resolution without a lot of work needed. If the work to be performed does not require a retainer means that it may include complex time-intensive activity that would put your client’s matter in jeopardy if that activity were more.
A contingent retainer is one that one party pays the retainer and the other does not, with a value of the case as a whole. This type of retainer is usually encountered in personal injury cases, which are recovery-based. The client and attorney will have a contract where the attorney receives a percentage of whatever is recovered if they win, while the client receives whatever remains. Even if all parties do their job, the underlying case may not result in a monetary award. This type of retainer is most seen in personal injury cases, but may be used in other cases where there is a large underlying risk that may result in either a healthy recovery or none at all.
Drafting a Retainer Agreement
The first step in drafting a retainer agreement is to determine whether one is legally required or has been requested by the client or some third party (e.g., insurer, lender, etc.). If neither of these circumstances exists, then a comprehensive written retainer agreement is probably not required. Its value, and the value of the lawyer-client relationship generally, increases with the complexity of the matter. However, even in very simple matters, if the fee arrangement is unusual or less than transparent, there may be value in the documents to both lawyer and client.
After determining the above, then it is time to begin an evaluation of what should be included in a retainer agreement. Essential elements include, at a minimum, identification of the client and the lawyer(s), a description of the services to be provided, the basis or rate for calculating fees and costs, information about the disbursement of any unearned fees, and a clear statement of the terms of the lawyer-client relationship. Optional but oftentimes helpful items include a statement of the goals and objectives of the representation, a strong disclosure of potential conflicts, and a contingency or sunset clause that would provide an opportunity for a re-examination of the relationship after the passage of a year or so.
A sound approach to drafting a retainer agreement is to review several samples and incorporate those elements that make sense for the precise relationship. Again, the more complex the interaction, the more likely it is that the retainer agreement will necessarily become more detailed and comprehensive. In contrast, a form retainer agreement typically is sufficient for most of the attorney-client relationships in today’s legal environment.
Retainer Agreement Mistakes
It is not uncommon for lawyers to prepare retainer agreements with little thought and less care. We see them all the time – probably because we are drafted many and when we see poorly drafted documents we have to correct them. Below are some of the more common errors we see.
Inadequate identification. It is absolutely essential that the attorney and the client be adequately identified in a retainer agreement; without knowing who the person is that is named in a retainer agreement, it is impossible to determine who the agreement should be enforced against, and so the documents become meaningless. It is not enough to identify a person or company by its name. The name must be qualified by the address of the named person or company. It is a common occurrence for the named party in a retainer agreement to move. In most jurisdictions, the applicable statute of limitations is within a few years, and when someone moves, the chances become remote that they can be located easily a few months after they move. The solution to this problem is to insure that any named party is qualified by an address that would not likely change. Examples include a firm name , or the name of an individual with a middle initial.
Improper limitation of services to be performed. An important term of a retainer agreement is the scope of the representation to be performed. There is a tendency to identify only those services that actually will be performed, or to attempt to limit the services to be performed to something that is outside of the control of the lawyer. For instance, a lawyer may attempt to limit his services to a specific administrative duty such as drafting a petition. This type of limitation to the scope of the representation is meaningless because there is no way to predict what other services will need to be performed as a result of the petition being filed, nor can anyone tell how long it will take to complete all of the tasks that the lawyer needs to perform. The solution to the problem is to insure that the scope of the retainer agreement is described so that it includes all possible tasks that can reasonably be expected to be involved in the representation, and to leave to the lawyer the discretion to include additional tasks that may be needed.
Sample Retainer Agreement Template
The following is an example of a retainer agreement from a law firm in Massachusetts. The majority of the sections of the agreement outlined below are basic boilerplate terms that can be found in most law firm retainer agreements. Some of the additional terms addressed in this agreement may encompass specific rules for attorneys in Massachusetts and/or specific rules that are only necessary with certain practice areas. All attorneys licensed in the Commonwealth must abide by the Supreme Judicial Court Rules of the Board of Bar Overseers regarding client trusts and fees. Attorneys should consult the appropriate rules from their state for a complete understanding of their fiduciary duty to their clients.
Retainer Agreement
This Agreement made and entered into by and between the undersigned client (hereinafter referred to as the "Client") and CLIENT LAW FIRM, P.C. (hereinafter referred to as the "Attorney"), having a business address of CLIENT LAW FIRM, P.C., CLIENT STREET, CLIENT CITY, CLIENT STATE ZIP. In consideration of the mutual covenants, representations, under standings and agreements, by and between the parties hereto, Client and Attorney do hereby agree as follows:
- Identity of Parties.
- Scope of Services to be performed by Attorney. In consideration of the retainer hereinafter provided, Client employs and retains Attorney to ‘represent the Client in connection with the prosecution and settlement of Client’s case in the Massachusetts (hereinafter referred to as the "Matter"). Hereinafter, the term "Matter" shall also refer to any other matter which the Client specifically engages the Attorney to perform legal services.
- Contact. Client agrees to cooperate with Attorney as needed at all reasonable times and consult with Attorney on all other matters which arise during the course of the representation. In the event that the Client receives communication concerning the Matter from Attorney or the Insurance Company, including but not limited to communications concerning the settlement offer or demands, the Client agrees to consult Attorney prior to taking any action concerning the communication and agree to keep Attorney fully informed as to all developments.
- Attorney Fee. Client agrees to pay Attorney a fee (hereinafter referred to as "Attorney Fee") for the time expended by Attorney and/or the attorneys and/or paralegals and/or investigators and/or experts and/or support staff employed by Attorney on behalf of Client in the Matter, calculated by multiplying the attorney’s hourly rate by the time expended. The hourly rate for Attorney and all attorneys employed by Attorney is $X, the hourly rate for paralegals and investigators is $Y. The hourly rate for support staff is $Z.
- Retainer. Concurrent with the signing of this Agreement, Client agrees to pay Attorney the sum of $A.
- Payment of Attorney Fee. Payment of the Attorney Fees will be made by attorney regularly invoicing the client for the basis of costs incurred by the firm, usually on a monthly basis. All invoices are due and payable thirty (30) days from the date of issuance, unless objected to by the client. Any invoices not paid by the fifteenth (15th) day after issuance will accrue interest at the rate of 25% per annum. Upon completion, and final resolution of a case, any amount left remaining in the Trust account will be returned to the client with the balance of the firm fee in the terms set forth above.
- Limitations on Client’s Recovery. By signing this Agreement Client authorizes Attorney to retain out of any settlement or judgment obtained for Client, in addition to the Attorney Fee, all necessary costs and expenses which Attorney incurs on Client’s behalf, including without limitation: (a) court costs, (b) filing fees, (c) deposition costs, (d) witness fees, (e) copy charges, (f) underground service location, (g) medical and property damage reports, (h) facsimile costs, (i) automobile repair estimates, (j) postage, (k) investigators fees, and (l) MCAI (Computer vs. Computer) Report Fee. Client further agrees that Attorney shall be entitled, in addition to the Attorney Fee, to: (a) his hourly rate times the number of hours expended, for any work performed on Client’s behalf after Client unjustifiably rejects the settlement offer recommended by Attorney, (b) the full amount of the costs and expenses which Attorney incurred after Client rejected, declined, or dismissed the case, (c) the entire fixed premium for any bond which Attorney is required to obtain in connection with Client’s case, and (d) any necessary out-of-pocket costs and expenses which Attorney incurs in connection with appeals arising out of Client’s case.
- Trust Account. Client and Attorney agree that Client’s retainer shall remain in Attorney’s Trust Account until the representation contemplated in this Agreement has been completed or Client has otherwise terminated . . .
- Disbursement of Attorney Fees and Costs. Upon completion of the work performed by Attorney on behalf of Client, it is agreed that Attorney is entitled to first recoup and disburse any advance costs incurred and paid for by the Attorney on behalf of the client. Second, the costs of the case shall be deducted against any settlement or verdict. Third, the cost of the attorney’s fixed premium for the bond to perfect the appeal shall be deducted from the settlement. Fourth, the attorney fees shall then be recouped and distributed depending upon the percentage arrangement outlined above that was agreed upon . . .
Retainer Agreement FAQs
Let’s take a look at some of the questions attorneys commonly hear from clients about lawyer retainer agreements:
What is a retainer agreement?
While there are many different types of engagement agreements, they are all categorized as a legal agreement between attorney and client. The retainer document will include information such as the services the attorney provides, the scope of legal services and the billing requirements.
Why is having a written retainer agreement so important?
A written retainer agreement is essential for protecting the attorney’s practice and interests. It also protects the client by providing a clear outline of the services provided, as well as the charges and fees.
Does each legal transaction require a different retainer agreement?
This all depends on the type of case. Some retainer documents can apply to more than one matter as long as the fees are based on the tasks performed and the services rendered. Many attorneys have a blanket retainer agreement that covers many types of potential legal matters . Anything not covered will be discussed with the client ahead of time and can be negotiated into the agreement.
How do I know if the retainer agreement is a good deal?
When you work with an attorney, he or she will discuss the fees and any funds that may be required as retainer fees before agreeing to take the case. With most arrangements, the retainer fees are used for initial services rendered. The employment retainer agreement will outline the proposed fees for the case or services, and the hourly rate for the specific case. Your attorney will discuss the rates and costs before you begin working on a case together.
Can I get out of the retainer agreement if I don’t like the services you provide?
Yes, as long as the attorney has provided clear services and you’ve received the service that was agreed upon beforehand. Your retainer agreement will state how to terminate the agreement if you decide you no longer wish to work with the attorney. Some stipulations include giving advance notice of cancellation and confirming that there are no outstanding balances due.