Law Firm Retainer Agreements – What You Should Know, What You Should Ask.
Retainer agreements between a law firm and its client are strongly recommended but are not mandatory to have in place. In many law firms it is common practice to ensure there is a retainer agreement that is prepared after the initial meeting with the client and given to the client for review, execution and return to the law firm together with a retainer deposit.
The retainer agreement’s role is to make sure that the parties’ expectations are clear from the start setting out the services that the law firm is to provide the client in exchange for the legal fees agreed upon. Occasionally a retainer agreement is overlooked by the law firm or the client, usually in the case of existing clients with long-standing relationships with the firm. However, this can lead to subsequent disputes as to the terms of the retainer and possibly litigation.
Generally, factors to consider for the use of a retainer are the type, urgency, complexity, or scope of the legal services to be provided and whether the client is new or existing. Certainly new clients should be subject to a retainer agreement and existing clients should also receive one where the law firm will be attending to a large or complex matter.
At a minimum, a basic retainer agreement should encompass the following:
1. The Client – the retainer should be clear as to who the client is/are. For example, is it an individual? His/her company? A joint retainer on behalf of numerous parties? An agent on behalf of a 3rd party, such as a property manager on behalf of the registered owner of the property? In that case, the parties need to be sure that the agent has the authority to bind its principal, who may not be a party to the agreement.
2. Scope of Representation – what is the law firm being retained to do? Is it a specific task such as tax advice on a particular transaction? A one-time purchase or sale of a property or business? Is it general advice to a company in all areas that the company currently carries on business? It is important for both law firm and client to understand the scope of representation as the fees in the retainer are going to be tied to that scope. It may also be wise to indicate in the retainer, the likelihood of success in the matter.
3. Instructions – in the event that there is more than one client, then it is vital for the law firm to know with certainty, which party is going to be providing it with instructions. If it is more than one party and there is a disagreement amongst those parties as to the instructions, then work on the matter may come to a halt. The retainer should provide for what happens if a conflict of interest arises. For example, if a law firm is acting for a number of parties who are to be shareholders pursuant to a shareholder’s agreement, the retainer must be clear as to what happens if a dispute arises. For whom will the law firm be able to continue to act, if it can continue to act? If one of the parties has been a long-standing client of the law firm, the retainer should make clear that if a conflict arises, the law firm may be able to continue to act for that client but that all other parties would be will be referred to other counsel.
4. The Fees – the retainer must set out the basis for charging legal fees. Is it an hourly rate, flat fee or other method. In addition, it should provide for the amount and payment date of any initial monetary retainer, ongoing monetary retainers and billing frequency. Retainers also typically address the consequences of the clients failure to pay accounts in accordance with the terms of the retainer. If there are going to be significant disbursements involved, then that should also be provided for. Finally, the retainer should clearly set out that the fee estimate is merely that i.e., an estimate and if possible, the circumstances that may result in an increase or decrease in the estimate.
5. The Retainer Deposit – typically, the retainer will provide that the client pays the law firm a retainer deposit in order for the law firm to commence its work. The law firm will apply the deposit towards legal fees and disbursements incurred and the retainer will provide that when the deposit has been, or is close to being fully utilized, then a further retainer deposit is required from the client. If the further retainer deposits is not paid, then the law firm may not be prepared to proceed further with the file.
6. File Supervision – who at the firm will be handling the file? Even though the client may be dealing with the lawyer with whom it has a relationship, that lawyer may not be the person who does the work on the file. The retainer should identify those lawyers and law clerks who may be providing services to the client in relation to the matter together with their respective hourly rates, even if there is a estimated fee for the entire matter.
7. Timeliness – the retainer should address the expected time line for the matter to be completed, as well as how often the client should expect to receive updates on the file status and accounts from the law firm. The retainer should also deal with the estimated time it will usually take for the lawyer/staff to respond to client calls, e-mails, letters or other communications.
8. Communication – what is to be the manner of communication between lawyer and client? Telephone, e-mail, mail, courier or facsimile? All communications will require the pertinent contact information to be provided by the client. When the client contacts the lawyer’s office and the lawyer is not available, what is the mechanism in place to address the client’s questions, and does the client know who to speak with as backup?
9. Changes in the Retainer – in the event the scope of the retainer changes due to additional work being required or requested, then this should be confirmed in writing, together with a revised fee estimate.
10. Termination of the Retainer – like other agreements, the retainer should provide for what happens to the file upon completion of the matter. What is returned to the client? What is the law firm keeping for its records? Law firms are required to retain files for certain periods of time after which the file can be destroyed. The law firm’s policy on file retention and destruction should also be addressed in the retainer.
The Lessons: These are some of the fundamental considerations that need to be addressed in the retainer agreement. There are instances where no retainer is entered into or a very simple one is required, such as on the purchase or sale of a house but prudence dictates that it is wise to have something written in place. A properly drafted retainer for more complex matters is critical in order to ensure that the parties have common expectations for the law firm/client relationship and to manage those expectations during the process.
Disclaimer: This article is for general information purposes only and not intended as or to be relied upon for legal advice. Consult with a lawyer for your unique situation.
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