Understanding Agreements for Representation by Attorneys: A Primer

What is an Agreement for Representation by an Attorney?

The attorney representation agreement is a written contract between the prospective client and the lawyer, usually in an engagement letter format. It sets forth the services to be provided by the lawyer (or law firm), and the responsibilities of both the client and lawyer under the agreement. As an initial matter , it can be a document by which both client and lawyer begin to define their respective rights and obligations to each other. Many times, it is used by the lawyer to limit the scope of the legal services to be provided. The attorney representation agreement is also the document that complies with the applicable ethics rules requiring that a written fee agreement or engagement letter be provided to the client.

Essential Elements of an Agreement for Representation by an Attorney

The scope of services is a critical component of any representation agreement. In many instances, the client may provide the law firm with voluminous client documents. The law firm should list all the items being provided by the client. Similarly, the law firm should identify all the obligations of the client to assist with the administrative tasks. The law firm should also identify those tasks that will require legal training or expertise and, if applicable, should make a list of certain tasks which the client will not perform. The most common fee arrangements include hourly billing, contingency fees or hybrid arrangements. The primary concern with fees is to provide a clear and cumulative summary of rates for all attorneys and staff working on the matter, including any cost of living increase opportunities. The rate card should also reflect the date of when increases may occur. An increase in rates presents both an opportunity and a concern. On one hand, it can be used as a tool to break up the accumulation of legal fees, allowing the client to consider the complexity of the issues and decide whether to continue in light of the increased cost. On the other hand, some clients overreact to any increase in fees and may sever their relationship with the law firm, even if the additional cost is easily justified. The need for accurate and timely billing is very important to maintaining the client relationship. The representation agreement should discuss when invoices are generated, such as weekly or monthly, when payments are expected, such as by the 10th of each month, and what happens if payments are made late, such as a suspension of work. Failure to timely pay invoices is the number one issue of concern to a law firm. Depending on the complexity of the matter, confidentiality provisions can become necessary to protect privileged information shared between the attorney and the client. Items that should be covered by a confidentiality provision include all communications between the law firm and the client as well as work product created by the law firm. The client should be informed that providing copies of documents to outside vendors, such as experts, may result in a waiver of attorney client privilege. In such cases, if the proposed vendor is acceptable to the law firm, the law firm should consider entering a nondisclosure agreement with the vendor. The representation agreement should contain a termination provision that addresses how either party can terminate the agreement mid-matter. Factors to consider include how long notice is required prior to terminating the agreement, how much work is required to inform the court or client that the matter is ended, and whether any fees are required to be paid in advance upon termination. Some agreements allow for the law firm to withdraw within seven days of executing the agreement with no ramifications. Other representation agreements require advance fees for all work on the matter, regardless of when the client terminates the agreement. In the latter scenario, if the client pays no more fees in advance, the law firm may be stuck with work in process.

Advantages of an Agreement for Representation by an Attorney

Most everyone understands that it’s good to have a written agreement with their attorney, and this seems to be particularly true with corporate, commercial and transactional matters where the scope of the representation might be hard to pin down in a word or two. Whether a business’ needs arise out of a single event or over time, the chances are very good that things will not always go exactly as anticipated and a client could be left wondering what is covered by a verbal agreement. Additionally, with costs mounted to sometimes thousands of dollars, it would be a good idea to also address budget issues and work toward staying within that budget. Any work done by the attorney on top of the agreed to amount could come as quite a shock to a client. I think an even bigger surprise would be if you found years later that the attorney had not been taking the necessary steps to secure your rights in a matter. A Representation Agreement would require him or her to do so, and prevent any evidence being accidentally lost or destroyed.
A Representation Agreement will also protect clients from adverse consequences if a matter is handled inadequately. It will also reduce misunderstandings, especially when expectations are addressed, and benefits or risks are considered in advance.

Common Forms of Agreements to Represent an Individual

Common Types of Attorney Representation Agreements
The type of attorney representation agreement offered and/or signed may differ and will depend on the needs of both the attorney and the client. However, these agreements fall under a few general categories, which are discussed further below.
General Retainer
In most circumstances, general retainers are only used when the attorney is being hired to represent a client in various matters over a period of time. This is mostly applicable to corporate or commercial clients. A general retainer essentially serves as an agreement between the attorney and the client stating that the client will give the attorney a certain amount of money, which the lawyer can then withdraw from as needed. Certain types of services provided by the attorney may also not be covered under a general retainer and may have to be paid for on top of the advance.
Contingency Fee Agreement
Many people believe that there is no out of pocket cost for the client with this type of agreement. In general terms, a contingency fee is an agreement whereby the attorney is compensated under the condition that the client wins the case and receives monetary damages. The amount of compensation received by the attorney depends on the monetary damages sourced by the client and the specific agreement that is entered into by the attorney and the client.
Flat Fee Agreement
A flat fee agreement is an agreement whereby the client pays an agreed-upon, one-time fee at the start of hiring an attorney. The work is done for a set fee, instead of on an hourly basis. However, clients should keep in mind that this type of fee may not cover other fees associated with the case.

Negotiating a Representation Agreement

In order to make an agreement that is satisfactory to you, you need to do a little bit of work. To that end, after reading and understanding the representation agreement, you need to discuss it with your attorney. When negotiating the agreement: (1) be clear about what you want; (2) be flexible about how to get there; and (3) be patient. Start with a list of what you want. For example, do you want the attorney to bill you by the hour, by the project, or on a retainer basis? Do you want to know the attorney’s daily billing rate, a range of rates based on the experience levels of the attorney and the attorney’s staff or paralegals who might work on your case, or the total monthly amount you could expect to pay? The more thorough you can be in advance, the easier it is for the attorney to get you started along the right path. Having this conversation at the beginning can also spare you the unpleasant surprise of receiving a multi-thousand-dollar bill only a couple of weeks into your case. Which brings us to No. 2 – be flexible. If you ask the attorney to bill you hourly, but a flat fee agreement could really work for your case, then consider whether an hourly agreement is your best option. If you don’t have a clear agreement because you don’t completely understand the process, but you don’t ask questions to clarify the information because you are afraid of offending the person you are talking to or because you are embarrassed about not knowing how things work, you could end up with a miscommunication that could cost you a lot of time and money to correct . The important thing is to remember that you are both working towards the same goal – a satisfactory agreement that protects you. It may take a few rounds of back-and-forth, but having a clear discussion with your attorney will help you understand how the case should unfold and, hopefully, provide you with some peace of mind. Sometimes attorneys are able to provide you with a consultation for free, sometimes they charge for it; make sure to confirm via telephone or email if charging will be involved before you commit yourself to a meeting. Don’t forget to ask about alternate payment options, such as installment plans, if that would help you satisfy the contract. Things to avoid when communicating with your attorney include: Hopefully, by the time you sign the representation agreement, you will have a good understanding of how the legal process works and what services you need from your attorney. But if you still don’t understand everything, don’t hesitate to ask for clarification. Lawyers recognize that their clients are not familiar with the legal process and that the clients’ comprehension of what is happening with their case is key to a good working relationship between the client and the law firm. Take the time to read the agreement carefully, but also make sure to ask about anything you don’t understand.

Enforcement and Assignability of Agreements for Representation by Attorneys

Legal enforceability of representation agreements is very much a jurisdictional issue. This is particularly true in the context of a firm’s ability to sue a former client for services rendered under a contingency fee agreement. Although there are some relatively recent cases on point, there is still a surprising lack of authority dealing expressly with the issue of jurisdictional enforceability.
Where no statute or court rule exists, the existence of a contingent fee contract with a former client does not give rise to any greater right to relief in a court of competent jurisdiction than would arise from a retainer agreement, and there is a split of authority regarding whether the statute of frauds precludes any breach of contract claim for fee collection absent a writing, even if there is some formalization of the fee agreement. Even if a written retainer exists, its enforceability may be questionable leading to continued litigation.
In Gordon & Rees, LLP v. Cluster, No. C 11-02568 SBA, 2013 WL 5304050 (N.D. Cal. Sept. 20, 2013), the court in a Northern District of California diversity action discussed this split of authority in light of California law and held that the statute of frauds did not apply. Gordon & Rees, LLP v. Rowe, No. 3:10-cv-05896-SI, 2012 WL 5920356 (N.D. Cal. Nov. 26, 2012), another Northern District decision, held the same.
In Sangster v. Paetkau, 77 Cal.App.4th 509, 91 Cal.Rptr.2d 858 (2000), a California Court of Appeal upheld claims for both quantum meruit and breach of contract, in a case in which there was an oral agreement regarding fees. The appellate court further commented that "with the correct application of our discretion to allow the amended pleading . . . this case was not settled ‘merely on a potential claim of quantum meruit based upon factual support which could not be used in this manner in another proceeding’." Moreover, it further emphasized that, "unless we create a binding precedent where none exists, the rule giving effect to a contract will not allow a party to circumvent a statute of frauds by asserting a claim for quantum meruit."
However, in McKinley v. Stadtlander, 105 Cal.App.4th 907, 129 Cal.Rptr.2d 444 (2003), a California Court of Appeal dealt with inconsistent interpretations of the statute of frauds doctrine. In that case, the court allowed the party to amend its pleadings to avoid the statute of frauds. There, in addition to asserting a breach of contract claim, claims were also made for "quantum meruit, breach of fiduciary duty and unfair business practices." The appellate court further opined that the trial court improperly disallowed the party to "amend his complaint to conform to the proof by demonstrating not only quantum meruit damages for work performed under the oral agreement, but also the damages for breach of fiduciary duty and unfair business practices arising from Stadtlander’s wrongful acts." Notably, the court also for supporting its determination cited to City of Hollister v. Monterey County Superior Court, 165 Cal.App.4th 830 (2008), which is discussed below.
As important as a leading case it is in interpreting the statute, City of Hollister v. Monterey County Superior Court, 165 Cal.App.4th 830 (2008), should be viewed as "narrowly interpreted," standing for the principle that an oral contingency fee agreement was not necessarily void, against public policy and unenforceable where the court ordered settlement, even though the order also expressly contemplated possible thereafter enforcement proceedings under the contingency fee contract. In contrast to the Gordon & Rees decisions, this decision was in a different division of the court of appeal and the majority cited to numerous cases, including situations where oral contingency fee agreements were held enforceable.
Alabama and Maryland courts have also continued to enforce oral contingency fee agreements. See Evans v. Walters, 605 So. 2d 787 (Ala. 1992) (holding that the statute of frauds did not preclude oral contingency fee agreement); William A. Smith & Assoc. Law Firm v. Omni Group, Inc., 991 A.2d 683 (Md. App. 2010).

How to Avoid Trap Rules in Agreements for Representation by Attorneys

Lawyers often see a suit with allegations that were easily avoided. A lot of times, these allegations stem from misunderstandings with the client when dealing with attorneys at the beginning of the relationship. Unsurprisingly, these allegations almost always stem from confusion over the contract. This isn’t unique to attorneys, but it has happened to plenty of attorneys.
One way to avoid these suits is common sense: don’t avoid or ignore the contract. Common errors, in general: Common errors, specific to attorneys: The contract should explain everything you will do for the client, what the client should expect, and what you expect from the client. The law firm should give the client the opportunity to read the contract before they sign it. You don’t want your contracts to be as lengthy and detailed as possible, you want your contracts to be clear and straightforward so there are no surprises. Make sure the retainer agreement contains clear and mutual understanding of all the coverage provided, limits of scope, disclaimers, billing, fees for various hearings or actions, and client’s responsibility to pay for costs of third parties, such as filing fees. Asking for the full bill all at once can turn off a lot of clients. You don’t want to hit them with a large sum of money as soon as they sign the contract. Taking the bill in small pieces over a long period of time has been shown to work better. Making a big promise upfront can be off-putting. Large promises can make it hard to deliver results. One way to avoid this is using an engagement letter that outlines the client’s expectations and your own acceptance of such. Make sure to tell the client clearly and concisely how the attorney-client relationship will work. Make sure the client understands what this means relative to any fee structure being used.

Frequently Asked Questions Regarding Agreement for Representation by an Attorney

Many potential clients have questions about these representation agreements. This FAQ addresses some common questions in a clear and concise manner.
If I find a problem with the representation agreement, can I change it?
Yes. It is a contract between the client and the law firm. The attorney should be willing to explain and discuss any provisions you do not understand or are not willing to accept. Only sign a representation agreement which you are comfortable with.
How long is the representation agreement effective for?
The representation agreement will typically identify which specific matters the representation agreement covers. If a specific matter is not identified or is beyond the statute of limitations, there is no representation agreement with respect to that matter.
Can I get out of the contract if I change my mind?
While a representation agreement is a binding contract, any reputable law firm will allow you to exercise your right to rescind the agreement within 24 hours of signing provided that you have not paid any retainer, advance, or other amount.
What happens if I choose another firm after signing?
You should sign a representation agreement with the law firm you want to bring the claim. If you have questions regarding potential conflicts of interest, you should consult with an attorney before choosing a different firm.
When do I pay the contingency fee?
The contingency fee is not due until the law firm successfully resolves the matter. If it becomes necessary to file a lawsuit, the contingency fee will not be due until a trial is completed or the case is resolved by way of settlement. The contingency fee may also be due upon summary judgment.
What if the firm obtains an inadequate recovery for my particular case? Do I agree to the same contingency fee?
The representation agreement can require payment of a larger contingency fee in situations where the law firm obtains a recovery without having prepared for trial. The firm obtains an increased fee if it settles the case without sufficient preparation for trial. This is referred to as the "settlement cap." There can also be an increased fee where the case is complicated or would require more than a few hours of time to prepare for trial. This is referred to as the "trial wage." This is sometimes called a "trial premium."
What if we have not discussed costs , expenses, or fees?
The law firm is entitled to seek reimbursement for out-of-pocket costs and expenses. These are set out and described in the contingency representation agreement. They can include court filing fees, fees for depositions, fees paid to experts, and other similar items. Once the law firm incurs costs and expenses, it retains a lien for reimbursement. Costs and expenses are typically deducted from your portion of the recovery after the attorney’s fees are deducted.
Do I have to pay the costs and expenses up front?
It is very common for expenses to be paid by the law firm and deducted from your portion of the recovery at settlement or judgment. Some law firms require payment of the costs and expenses up front. However, the law firm must, at a minimum, discuss these costs and expenses with you.
Is legal malpractice insurance required?
Whether the law firm has legal malpractice insurance is a question you should ask. There are some organizations that require attorneys to carry this type of insurance. These include the State Bar of California, which for years has required attorneys to report the existence of insurance on the annual "MCLE" Form 2; as well as the Administrative Office of the Courts in New Jersey, which requires insurance coverage in certain circumstances. Other jurisdictions, such as Illinois, do not require insurance coverage.
How does the legal malpractice insurance system work?
Some types of legal malpractice insurance policies are purchased by individual lawyers who work at several law firms and by law firms. Other insurance products are structured as group or master policies covering many more lawyers at many more law firms. In either case, the insurance proceeds belong to the injured client, not the law firm.
Why isn’t a provision requiring arbitration of disputes with the law firm always required?
In some states and under some circumstances, arbitration of disputes with the law firm is considered contrary to public policy, especially in claims asserting the law firm caused the underlying claim to be barred by a statute of limitations.