What’s a Legal Services Contract?
A legal services contract is an agreement between an attorney and a client that outlines the scope of their relationship and the services to be provided. This contract is vital to ensure that both parties are on the same page when it comes to the objectives of the legal representation, the fees involved, and any other relevant terms. A legal services contract provides a clear understanding of what the attorney will be doing for the client, how much that attorney will get paid, when the attorney gets paid, and a host of other related topics as well.
Legal services contracts can serve a wide range of purposes. Some of the most common include services related to estate planning, criminal law, business law, family law and real estate. However, legal services contracts can apply to virtually any legal matter.
Legal services contracts can help clients make informed decisions about their objectives. By clearly defining what services will be performed and under what terms , clients can be certain they know what the scope of their legal representation should be. This in turn allows them to discern whether they feel that the cost of legal representation will be worth the cost to them or whether they simply want to handle their case without outside assistance.
From the attorney’s perspective, legal services contracts are also critical. They allow attorneys to clearly define what the extent of their representation will be and in many ways protect them from being overworked or taken advantage of by clients. Legal services contracts furthermore allow attorneys to protect their investments by securing payment for their services, either up front or on the back end.
Legal services contracts can help ensure that the needs of both clients and attorneys are met and that both feel confident in the relationship they are entering into.
Components of a Legal Services Contract
Along with the definitions and governing law clauses, your contract with a legal services provider should absolutely contain a scope of work. In other words, what exactly is being done, and when? A clear scope of work in your contract with your outsourced counsel will also give you fair leverage in the case of non-performance. You can generalize the services again by asking the provider to broadly explain the work that she does for others, and then tailor that to your needs; but you also want to include some sort of remedy for your side if the terms of the contract are not met.
Because payment is so closely tied to performance, make sure that your contract also includes the way that payment will be made. This is usually the fee structure based on an hourly rate (think only 2-3 of your most expensive lawyers when determining this rate, if you want to retain cost-efficiency) or in fixed terms (e.g. $2000 per month) with a description of when and how it will be paid. Other payments can then be added as contingencies.
Finally, be sure to include the standard do’s and don’ts for confidentiality – including NDAs and codes of conduct in addition to specific confidences required by law.
Types of Legal Services Contracts
While we describe types of legal processes that require different kinds of contracts with lawyers, there are broadly three types of contracts that lawyers enter into with individuals or businesses for the provision of legal services:
1. Retainer Agreements
Most law firms offer legal services under a general retainer agreement for all the usual matters that may arise in a person or entity’s life. The legal and ethical considerations require that the firm has discretion over the amounts and types of services provided and the methods and amounts of payment required from the client. In addition, a client should be informed in advance of how and at what intervals the firm will bill to obtain confirmation that payment will be made.
2. Flat Fee Agreements
A flat fee request by a client is generally met with some resistance by a qualified law firm because of the need to evaluate and anticipate all contingencies, the need to develop a thorough understanding of the nature of the case and the need to plan carefully all the necessary actions required. A general retainer agreement is usually the best way for the client to avoid problems with a flat fee agreement when the fee is exhausted before the service has been fulfilled.
3. Contingency Fee Agreements
Certain cases allow attorneys to provide services in exchange for a contingency fee. Where lawyers can receive a percentage of the amount recovered in damages or settlement and also where they can obtain their cost of bringing an action or performing a service for the client. In such cases, the selection of external experts can be limited and the attorneys may have to evaluate the plaintiff’s statement of the case based on the plaintiff’s input and claims. There are many variations on this type of contract and the various payments required in the agreement. These contracts require sophisticated and detailed drafting to obtain protection for the client, so it is important to get any contingency fee agreements reviewed by experts experienced with lawyers in your practice area before proceeding with services under the contract.
How to Write a Legal Services Contract
With the initial due diligence and risk assessment steps completed, the next step is the negotiation of the terms of the engagement, its scope and the laws that will govern the relationship. Negotiation here can be informal or involve more formalized rule-making—the jurisdiction’s rules of professional conduct or the parties’ respective guidelines for best practices or ethical standards. It should include the process for engagement and disengagement, payment of fees, performance at the beginning and through to the end of the matter of both the attorney and client, and the procedure for resolving any differences or disagreements that may arise in the future.
Engagement and disengagement are obviously critical to the success of the professional relationship. Too many engagements are capricious and proceed without clarity of the scope of services to be provided, the limitations on the attorneys’ engagement and authority, and the hierarchy within the firm in relation to the client. While it may seem simplistic, the most successful relationships are those in which the partners and associate(s) working on a matter and the client’s representatives know who is the lead attorney from the outset and have a list of the attorneys’ responsible for providing the services and their areas of expertise. Your services need to be cost-effective if you are going to serve your clients’ best interests and fulfill your role as trusted advisors.
I believe there is a 95 percent correlation between the due diligence and risk assessment activities and the final contractual agreement. In other words, the matters that need to be addressed in the discussions will overlap with the requirements in the contract. By understanding the problem your client seeks to solve, then, it easier to craft an effective piece of client-facing documentation that defines the services to be provided on the matter—a legal services contract.
Legal Services Contract Mistakes
Legal services contracts, like any contracts, contain pitfalls and considerations that if omitted or misunderstood can have significant ramifications for the parties to the agreement. Fortunately, many of these pitfalls have clear solutions. One of the most common situations is where the client chooses to negotiate out the assignment of rights clause, a consideration which is almost universally standard in most legal services agreements. When the client alone can determine whether litigation proceeds, odds are the case will not proceed. Therefore, for creative counsel outside of litigation to be able to present a case to a jury or arbitrators, there must be an incentive for the client to move forward with the case or an assignment to the counsel or firm that has the motivation to take the case forward.
Another issue frequently overlooked is who will get paid back if a case does not succeed. The legal services contract should include provisions explaining whether the law firm will have the right to recover their managers or flat fees or cost advances from the case before the client recovers their damages or not until afterward. In most cases , that it is the only way to ensure that the law firm sees a meaningful return on investment for pursuing the case. Without that in place, the entire business model suffers and for the client, the result can be less than ideal.
One other pitfall to look out for is where the legal services contract is vague about the rights each party has to leave the deal. That is, evaluative controls and other mechanisms that enable the client to make sure the lawyer or law firm lives up to its end of the bargain, as well as mechanisms (such as exit fees) that enable the law firm to negotiate for a robust return on investment for the case. Without these contractual protections in place, the risk shifts almost entirely to the legal services provider.
There are many more potential pitfalls for legal services contracts, such as where a client believes that a contingency fee is illegal even when the terms of the retainer agreement are otherwise perfectly lawful. Regardless, it is critical that every aspect of legal services contracts be examined with care so that every facet is consistent with the state of the law, common practices in the industry, and the goals of the parties.
Legal Services Contract Tips for Clients
It’s important to do your due diligence before signing a contract with your client. This ensures that you’ve done your part as far as safeguarding your business, and that your clients are aware of their commitments to you. Whether you hire an attorney or draft up the contract yourself (whom we highly recommend!), here are a few things to consider:
- Scope of representation. It is vital that you both agree on what exactly is being provided, be it a single session of mediation, six months of weekly sessions, or anything in between. Articulating what your service entails will help you avoid any "In order to proceed, your credit card will be charged at the end of each month" confusion. Similarly, if you’re providing services that span a specific duration, it’s worth professionally determining when the beginning and end of that service will take place, or whether there are any limitations (such as hours) for the outcome of a mediation.
- Compensation. There may be prominent questions on everyone’s mind, such as: what kind of payment will be accepted (check, credit, cash, etc.), and for how long (is payment due at the time of service, or once per month?), but there are many nuances to take into account. Namely, will there be a late charge? A fee for any returned checks? A one-time charge for receipts? Is a deposit necessary? All these factors come into play when determining how a legal services contract should be structured.
- Confidentiality. Confidentiality is important for more reasons than we can count, and it should be made clear in your contract that confidentiality includes all personal information, including anything in the background, unless the context suggests otherwise (e.g., if a person sees that you were recently scammed, that infers that you had cash in hand). You’ll want your clients to feel that they can speak to you without fear of reprisal, and it’s your job to assure them that there are remedies available should this confidentiality be broken.
- Non-competition. This may go without saying, but it’s best to be clear about whether or not any information gained in your sessions can be used to "steal" your clients away. Your contract should include language to the effect of: "Client agrees not to attempt to solicit or use any materials, information, or other resources obtained through their sessions for personal gain."
- Opt-out. Odds are you and your client are the right fit for each other; however, if at any point someone should feel that a relationship isn’t working out, there should be a plan in place to terminate the contract. It’s usually advisable to give at least 24 hours notice, so as to avoid someone feeling blindsided.
How to Handle Legal Services Contract Disputes
A dispute may arise between a legal service provider and a client. This is not uncommon considering the complexity of the legal field and the types of services provided. If such a dispute arises, it is important to know the steps that can be taken to right any wrongs and settle the matter amicably.
First, it is important to review the contract you and your provider signed. This document should outline any potential disputes, what they will entail and how they will be handled. It’s not uncommon for this section of the contract to be vague or simply state that the dispute will be resolved through arbitration. However, it should shed some light on your legal rights as a consumer of legal services.
Next, consider reaching out to the legal services provider to discuss the matter at hand. A simple phone call or an email may be enough to alleviate the situation and set the record straight . Open and honest dialogue often goes a long way in business, even when a contractual obligation has been violated.
If you and the legal services provider cannot come to an agreement, consider enlisting the services of a mediator or another third party. This neutral person can look at each side of the dispute objectively and provide solutions that will work for both parties. Sometimes, sitting down with an unbiased third party can bring the two sides closer together. The mediator may also suggest arbitration as an alternative to court hearings.
If you are unable to resolve the matter, it may be time to seek legal action. This should be a last resort after all other options have been exhausted. At this point, you will need the assistance of an attorney who specializes in legal service contract disputes.