Types of Fee Arrangement
Clients do not buy lawn services without a contract, and they should not be expected to buy legal services without being informed about your fees and expenses. A written fee agreement spelling out information about payment of fees and expenses as well as billing procedures should be signed by both you and your clients. Fee dispute claims most often arise when a client who did not receive a written agreement balks at paying some portion of the lawyer's bill. The lawyer then sues to collect on the account, the former client counterclaims for malpractice, and the lawyer-client relationship degenerates into a costly, time-consuming battle.
Included in this publication is a sample hourly fee agreement and a sample contingent fee agreement, both of which can be modified to suit your needs.
Discussing the fees that will be charged:
So long as the fee is "reasonable" and not "clearly excessive," a wide latitude exists. See NHRPC 1.5. However, clients are usually billed in the following ways:
There is one important final caution. Do not begin work until the fee agreement has been signed and the retainer paid. Otherwise, you may find yourself in a case without an understanding with the client as to what work will be done and what fees will be paid.
You may agree to do a particular service, for example, draft a trust agreement for a pre-set amount.
A contingency fee is permissible except in criminal cases and in domestic matters. See NHRPC 1.5. Most plaintiffs personal injury is done on this basis, where the lawyer is paid a fixed percentage of any recovery, plus costs. The attorney takes a risk of recovering a fee based on the outcome of the case. Because of the risk you are taking, it is crucial to critically evaluate your client's claim. Do not merely rely on what your client tells you. Check other sources before you commit yourself. Rule 11 of the Federal Rules of Civil Procedure requires that you make a reasonable inquiry into the facts and legal basis of your client's claim before filing suit. Additionally, New Hampshire state law provides sanctions for bringing a frivolous suit. See NHRPC 3.1 and NHR.S.A. 507:15. Your economic well being should also compel you to do so.
Most lawyers bill clients for the time expended on their behalf. The lawyer is paid a certain fee for the time spent on the matter. Hourly billing is best suited for attorneys when it is difficult to predict the amount of time necessary for a project. When paid by the hour, a lawyer is paid regardless of the outcome. The client bears the risk of loss. When billing by the hour, attorneys have less incentive to work efficiently. However, due to the current competitive environment in the legal profession with clients "shopping" for lawyers, attorneys may lose a client who perceives that he or she did not receive "value" for the services he pays for.
Value billing is a term of art in current legal economics circles. The client is charged for the value of your services. Generally, this means billing by a flat rate, after completion of the task based upon what has been achieved for the client. Value billing is advantageous for tasks you have repeatedly performed. In those instances, you know the average amount of time required for the project and you will not be paid less, the more efficient you become completing the task.
Who performs the services
Will the work be done by you alone, by you and your partner, or by you and other members of your firm? Remember that you may divide a fee with a lawyer in another firm only with the consent of the client, and then only if the attorney receives a division of proceeds in proportion to the services performed or the risks assumed. NHRPC 1.5(e)
Payment of costs
An attorney may advance costs but the client must remain "ultimately liable," subject to limited exceptions recently adopted as to representation of indigent clients and in certain contingency cases. See NHRPC 1.8. The fee agreement should specify whether the costs will be paid periodically, out of the retainer deposit, or out of the ultimate recovery in the suit. NHRPC 1.5(c)
Generally, you should obtain a retainer from your client. If your client is unwilling to pay a retainer, he has demonstrated that he has little commitment to his claim. He has also demonstrated his unwillingness to pay you in the future. You should not make a commitment to someone who is unwilling to demonstrate any financial commitment to his case. If you have a contingent fee agreement and the retainer will pay expenses, assess what your client can pay in the initial interview. The client should be willing to pay a retainer within his means. If a retainer for fees or costs is desired, the amount should be specified. It should also be made clear that additional retainers may be required and that the initial retainer does not necessarily constitute the entire fee. A retainer for fees must be placed in a segregated trust account and applied to bills only when incurred.
Frequency of billings
Specify when the client will be billed. Contingency fees and value billing can typically be issued only at the end of the case. Hourly cases should be billed as frequently as practical, monthly if at all possible. The sooner you bill your client, the sooner you will learn about his intent to pay his bill. Billing early and frequently also sends your client a message that you expect to be paid promptly. Flat fee cases can be billed in one lump sum or in installments.
Responsibility for payment
Make clear who will pay. Is the client responsible, or is some third person? If a third party guarantees payment, the guarantee should be part of the fee agreement.
Terms of payment
Specify when payment is due, i.e., upon receipt or within 30 days of the date of billing. If interest is charged, the rate and terms should be agreed to by the client in advance, in writing. If a discount is allowed for prompt payment, that should also be stated.
Termination of services
If you wish to reserve the right to withdraw for nonpayment of fees, non-cooperation of the client, or for other reasons, you should so state in the retainer agreement.
Disclosure of potential conflicts
If a potential conflict of interest exists, it should be disclosed in the retainer agreement. Absent "each client consent[ing] after consultation and with knowledge of consequences," a lawyer may not accept employment in a conflict situation. See NHRPC 1.7.