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Five Secrets to Understanding Attorney Fee Agreements

Updated on October 3, 2013

Introduction

One of the first things that happens when you are ready to hire a lawyer is you are handed a long technical document, often called a fee agreement or engagement letter, that you need a lawyer to understand. A fee agreement is a legal contract between you and the lawyer. Because lawyers are trained in contract drafting and interpretation, this can create an unequal negotiating position. Below are five secrets to making sense of an attorney fee agreement and to help you avoid getting ripped off. Click here for 5 Things You Should Know Before Hiring a Lawyer.

ONE: Take the Agreement Home Before Signing

Most fee agreements are several pages long and written in complex legalese. You are not required to sign the agreement in the lawyer’s office. Let the lawyer, or his or her staff, know you want to take the agreement home to read it first. If you are discouraged from taking the agreement home, that should be a red flag. Remember, a lawyer needs you more than you need them. If they don’t want you to take the time to review a contract before signing you may be curious about what they are afraid of.

When you are at home you can take time to carefully review the fee agreement.

Don't Sign the Agreement at the Lawyer's Office

Take time to carefully review fee agreement at home before signing.
Take time to carefully review fee agreement at home before signing. | Source

TWO: Cross Out Anything You Don’t Agree With

The document you were given is not sacred, and it is not set in stone. If there are terms you are not comfortable with, cross them out and initial the changes. If the lawyer does not accept your changes and refuses to sign the agreement you have the option of going somewhere else or negotiating language you are both comfortable with.

Lawyers may not notice if you cross out terms in the middle of the document, and be surprised later at what they signed. Lawyers will be taken aback if they notice you made changes. Some lawyers are sometimes surprised to find out what their own agreements state. Be prepared to calmly explain your concerns. A professional will be willing to at least discuss your concerns.

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THREE: Understand Key Terms

When you are at home take notes on a separate piece of paper about any terms you do not understand. Most of these can easily be looked up with a simple Google search. Some words in fee agreements are “terms of art”, meaning they have specific definitions and nuances in the world of contracts and attorney fee agreements. Below are some common terms used in fee agreements along with their meanings.

Trust Account

Lawyers often hold money that does not belong to them. This money must be kept in a separate account and not mixed with the money the lawyer uses to run his business. This special account is call a trust account, attorney trust account, or an IOLTA account. Except under special circumstances when you give money to a lawyer for work that is to be performed in the future, the money is put in a trust account until the work has been completed.

Minimum Fee

Many fee agreements have special minimum fees or minimum amounts of time that are billed for certain tasks. One example of a minimum fee is when a fee agreement says that the cost to open a file is $100. This is a minimum fee, even if all the lawyer does is have is or her staff write your name on a label and put in on a folder, you are charged $100. Another example is lawyers will charge a minimum of 1/10th of an hour increments, sometimes written as .1 hour, for an activity like talking on the phone. 1/10th of an hour is six minutes. That means no matter how short your phone conversation is with the lawyer it is billed to you as six minutes. If the call takes eight minutes you may be charged for twelve minutes.

Know Where Your Money is Going

Money for Future Work Should be Put in a Trust Account
Money for Future Work Should be Put in a Trust Account | Source

Earned Upon Receipt

This is language that means the lawyer is not putting your money in the trust account, but is treating the money like it is already earned and puts the money in his or her business account. Every jurisdiction treats this situation differently, but you need to know money that is earned upon receipt is much harder to get back if something goes wrong.

Contingency

Contingency fee cases means the lawyer does not get paid until you do. Personal injury and worker’s compensation cases are often contingency fee cases. You may still have to pay costs up front with this type of agreement. You may be charged an open file fee or be asked to pay for copies during the course of the case. Many people mistakenly assume that because a case is a contingency fee case they will not have to pay anything until it is over. However, most contingency fee agreements require the client to pay for costs during the course of the case.

Always Ask Your Questions

You Have a Right To Have All of Your Questions Answered
You Have a Right To Have All of Your Questions Answered | Source

FOUR: Ask Questions

You need to make sure you understand what a fee agreement means before you sign it. Ask the lawyer if you are unclear or uncertain about anything in the fee agreement. You should insist on talking to the lawyer, and not the staff, about any questions regarding the fee agreement. The lawyer is the one who will be signing the document, not the paralegal or the receptionist.

If the lawyer refuses to answer questions or makes you feel uncomfortable, do not sign the agreement and find another lawyer.

FIVE: Keep a Copy for Your Records

Remember a fee agreement is a legal document. You are making certain promises and the lawyer is making other promises. Keep a copy for your records. If something goes wrong down the road, you can refer to the document to help clarify what everyone’s responsibilities are.

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