THE IMPORTANCE OF A WRITTEN FEE AGREEMENT: Your First Line of Defense Against Malpractice Claims
Regardless of what your jurisdiction’s ethical rules say about written fee agreements, it is always a good idea to have one with each and every client, for each and every engagement – no exceptions. In establishing the scope of your representation, a carefully thought out fee agreement is essential and may prove to be your best defense to a malpractice suit or the best way to avoid a baseless claim. A thorough written fee agreement should cover certain key items.
I. NARROWLY DEFINE THE SCOPE OF THE ENGAGEMENT
Clients may believe that because they have retained you for one matter, you are their attorney in all matters. You can avoid this by narrowing and defining the scope of the engagement in your fee agreement. If there are disagreements between the parties, the agreement will, at the very least, provide a reference point between the parties or for the court. Your fee agreement may be one of the best tools to protect yourself if you are sued for malpractice. It is essential that the agreement state clearly what services you will provide and also in some cases what services you will not provide.
II. IDENTIFY YOUR CLIENT
Another benefit to a written fee agreement is the ability to define exactly who you represent. Let’s say you are approached by an individual who informs you that he has some potential partners and would like to form a business entity. Who do you represent? The individual, the individuals, or the entity? More importantly who thinks you represent their interests? A written fee agreement can help avoid this confusion and the potential liability that may follow.
III. IDENTIFY ANY CONFLICTS OR POTENTIAL CONFLICTS
Conflicts of interest may create a breach of an attorney’s fiduciary duty of loyalty to his or her client. If, despite the presence of a conflict, the attorney reasonably believes that he or she will be able to provide competent and diligent representation to the affected client, then he or she may proceed after acquiring informed and written consent of both parties. The best place to do this is in a written fee agreement.
IV. COSTS AND EXPENSES
Many malpractice claims begin with billing disputes. By stating in writing at the outset of the engagement who will be responsible for court costs and other expenses, you can avoid confusion down the line. In addition to stating who will be responsible for these costs, describe what costs will likely be incurred. Will costs be advanced and recouped at the end of the engagement, or will you require the client to forward such expenses? These details all belong in any good fee agreement. Finally, don’t lowball the fees or the expenses that the client is expected to pay – you are only asking for potential problems later on. Fee disputes often result in a client alleging malpractice.