An engagement agreement¹ is one of the first steps in establishing a professional relationship with a client. It includes much more than the requirements of the fee rule, SCR 20:1.5. It can be a useful way to communicate exactly what the lawyer and the client have agreed to do. An effective engagement agreement can guide the discussion with the client about the terms of representation. It documents this discussion, and it may prevent misunderstanding about the expectations and responsibilities of both the lawyer and the client.

In “Fee Agreements: Answers to Nagging Questions” (Wisconsin Lawyer, Oct. 2019), I answered some frequently asked questions about fees and the information that must be communicated to the client as well as provisions that are prohibited or should be avoided in communications with clients. In this article, I discuss some recommended provisions.

An effective engagement agreement can also serve as a risk management tool because it reflects the lawyer’s or law firm’s policies and procedures. Potential liability claims and grievances may be avoided through the use of effective engagement agreements.

There is no single format for engagement agreements. Some lawyers have one agreement that includes the fee provisions as well as other terms and conditions. Some lawyers have two agreements – one agreement for only the fee provisions and one agreement for the other terms and conditions. If two agreements are used, take care that the terms of the two agreements are consistent. Moreover, there is no specific content that is suited to all situations in which lawyers are engaged to represent clients. There are, however, areas of content that lawyers may find helpful when crafting an engagement agreement. In this article, I discuss some of this content and also include some illustrative language, which is enclosed in quotation marks. The illustrative language should be used as a guide only; it is not intended to be a substitute for the lawyer’s independent legal judgment.

Agreement Introduction

An introductory paragraph sets the tone for the agreement and explains the purpose of the agreement.

“The purpose of this agreement is to put in writing for you the terms and conditions of my representation. If you agree to these terms and conditions, please sign and return a copy of the agreement to me. It will then become a contract between us.”

Identity of Client(s)

This paragraph emphasizes the importance of precisely identifying the client(s). This paragraph identifies the client(s) using proper legal names. If there are other individuals who are reasonably related to the matter but who will not be represented by the firm, such a paragraph is a convenient place to expressly indicate that.

“We represent only A. We do not represent B or C. They are encouraged to retain other counsel. As this matter proceeds, we will protect A’s interests as best we can, which may mean taking action that might eventually disadvantage B or C.”

Depending on the sophistication of an organizational client, the following language may be helpful.

“As we discussed, we represent ABC Corp. When a law firm represents an entity, the firm’s client is only the corporation, not its individual officers, directors, or employees. While the firm is not precluded from representing individual officers, directors, or employees when there is no conflict of interest, any such representation would require a separate engagement agreement.”

When representing a client or clients who want to establish an entity, clearly state whether the client is the individual(s) or the entity.

“Our client is the [New Entity]. We do not represent any of you individually. It is important that each of you understands that the interests of [New Entity] may not always be identical to the interests of the [number] of you as its organizers, owners, and managers. In addition, the interests of any one of the [number] of you may not always be identical to the interests of the others. Therefore, each of you should carefully consider retaining independent counsel to advise and represent you separately from the [New Entity] and from the others.”

Scope of Representation

Although SCR 20:1.5 requires that the scope of representation be communicated to the client, it does not require a particular degree of specificity. A clearly identified scope of representation can avoid future misunderstandings. The scope-of-representation paragraph can also negate any implied obligation to advise the client about legal developments related to the matter after completion of the matter.

“Our firm has agreed to represent you in asserting your [identify claim, for example, personal property] claim against [opposing parties] arising out of [identify matter, dispute, or occurrence]. We will represent you in all aspects of your claim including negotiations for settlement and any litigation, arbitration, mediation, or other proceedings through final judgment and post-trial motions. [This engagement agreement] [Our representation] does not include any appeal or efforts to collect or enforce any judgment or award that may be entered in your favor.”

Keep in mind that a lawyer may limit the scope of representation under SCR 20:1.2(c) if the limitation is reasonable under the circumstances and the client gives informed consent. For consent to be informed, as defined in SCR 20:1.0(f), the lawyer must communicate adequate information and explanation about the material risks of and the reasonably available alternatives to the limited scope representation.

No Guarantee of Results

Often lawyers are asked by clients to express opinions about the eventual outcome of a matter or the likelihood of success of a particular strategy. A provision in the engagement agreement might discourage a disappointed client from claiming that success was guaranteed.

“We cannot guarantee a specific outcome in any case. We will, however, use our best efforts on your behalf.”

Personnel Assigned to Work on the Matter

This provision identifies the personnel who will work on the matter, including the lead attorney. It also can address the allocation of work between the lawyer and the client, as well as the use of paralegals, experts, consultants, and other personnel. This provision also can specify who will attend conferences, depositions, hearings, and trial. Because staffing assignments may change, designations should remain flexible.

“Our goal is to provide quality legal services to you in an efficient, economical manner. I will be the attorney primarily responsible for the representation. At times, [name], an [attorney or paralegal], may assist me. Occasionally, I may meet with [him/her/them] to discuss the representation, and two of us, on occasion, may attend meetings or proceedings on your behalf. While this practice may seem to be a duplication of services, we believe that it improves the quality of the work and is more economical. If you have any questions about our services, billing, or any other aspect of our representation, please contact me.”

Fees

The engagement agreement, if it includes the fee provisions, should describe the method by which the fees will be determined. Any special fee arrangements should be explained. For example, when a client establishes a budget or guidelines to reduce fees and charges, the engagement agreement should confirm such limitations.

“Our fees will be based on the amount of time spent by the attorneys and paralegals on your matter. My hourly rate is [amount], and the hourly rate of my associate, [name], is [amount]. The hourly rate for our paralegal is [amount]. These rates may be adjusted on an annual basis to reflect the increased experience and expertise of the attorneys and paralegals, and to reflect the inflationary increases in the costs of our practice."

This paragraph is also a convenient place to provide information about advanced fees.

“You have agreed to pay an advanced fee of [amount] for future legal services. The advanced fee will be placed into a trust account for clients. The funds placed in the trust account continue to belong to you until payment is earned for the legal services provided. You will receive a monthly statement describing the services provided, and [we will withdraw funds for the earned fees on the day the statement is sent] [we will withdraw funds for the fees incurred five days after the statement is sent]. At the conclusion of representation, we will refund any portion of the advanced fee that we have not earned.”

Costs and Expenses

An explanation should be provided for the firm’s charges for third-party costs and firm services. Expenses, like fees, must be reasonable. The engagement agreement should include any restrictions the client may have on the lawyer’s ability to incur expenses.

“In addition to the legal fees described above, you agree to pay the reasonable costs and expenses we incur on your behalf in connection with this matter. Such expenses include court-filing and service-of-process fees, witness fees, court reporter fees, photocopying, and travel expenses. We will not pay the fees and expenses of others such as experts, investigators, and consultants, or other large disbursements. These fees and expenses will be directly billed to you.”

If the lawyer has agreed to advance the costs on behalf of the client, the agreement should include a reimbursement provision.

“You are responsible for paying all reasonable and necessary costs incurred in investigating, preparing, and presenting your claims. These costs include filing fees, service or process fees, court reporter fees, photocopying, messenger and delivery services, videotape recording, the cost of any expert witness, and travel, which includes mileage, parking, airfare, ground transportation, lodging, and meals. [You have agreed to promptly pay or reimburse us for any such expenses or costs.] [We have agreed to advance these costs on your behalf, and you have agreed that we will be reimbursed for any costs we have incurred out of the funds we recover for you. If we do not recover an amount on your behalf, or if the amount recovered is not sufficient to cover the costs we have incurred, you agree to be responsible for reimbursing us for the costs we have incurred.]”

Billing, Interest on Unpaid Balances, and Withdrawal for Nonpayment

The engagement agreement can provide the client with a clear understanding of the billing frequency. The agreement can also emphasize that the firm expects timely payment. Any law firm policies regarding interest on late payment or past-due accounts should be included. If the firm intends to charge interest on unpaid balances, that information should be a part of the engagement agreement and be clearly communicated to the client at the beginning of the representation.

The Rules of Professional Conduct do not prohibit a lawyer from charging a reasonable rate of interest on outstanding balances, but the lawyer must notify the client of that intent as part of the duty to communicate the basis or rate of the fee. If a lawyer simply imposes the interest charges without client notification and consent, the lawyer may have violated SCR 20:1.5(b)(1), the duty to communicate the basis or rate of the fee, and SCR 20:1.5(a), the duty to charge a fee that is reasonable.²

SCR 20:1.16(b)(5) permits a lawyer to withdraw from the representation if the client fails to substantially fulfill an obligation to the lawyer, such as the payment of fees as previously agreed, and if the client has been given reasonable warning that the lawyer will withdraw because of the unfulfilled obligation. It is highly unlikely that such a provision in the engagement agreement, which deems late payment as the client’s consent for the lawyer to withdraw, constitutes a reasonable warning.

“We will send you a monthly invoice describing the services rendered and the costs incurred. The description of the services will include the date of each service, the person rendering the service, the amount of time spent in minimum increments of one-tenth of an hour, and the details of the service provided. The monthly invoice will also itemize the costs incurred on your behalf such as filing fees; court reporter fees; charges for investigation, travel, and accommodation; [add other costs]. Your account balance is due upon receipt of the statement. If the account balance is not paid within 30 days from the date of the statement, a late charge of 1% will be assessed. If your account becomes more than 90 days past due, we may seek to withdraw from representing you after providing you with a reasonable warning.”

Communication

Communication, or lack of communication, is the single most cited reason for client dissatisfaction and one of the most frequent reasons for discipline of lawyers. Lawyers are mandated by SCR 20:1.4 to 1) promptly inform clients of any decision or circumstance that requires client consent, 2) reasonably consult with clients about the means by which clients’ objectives are to be accomplished, 3) keep clients reasonably informed about the status of the matter, 4) promptly comply with clients’ reasonable requests for information, and 5) explain a matter to the extent reasonably necessary to permit clients to make informed decisions.

Reasonable communication between the lawyer and the client is necessary for the client to effectively participate in the representation. The engagement agreement should inform the client of the firm’s policy on the standard time period for responding to or acknowledging client communications.

The engagement agreement should inform the client of the firm’s policy on the standard time period for responding to or acknowledging client communications.

“Reasonable communication between the lawyer and the client is necessary for effective representation. We will respond to or acknowledge your communications within 24 hours. We will promptly inform you of any circumstance that requires your consent, reasonably consult with you about the means for accomplishing your objectives, keep you reasonably informed about the matter, promptly comply with your reasonable requests for information, and explain a matter so that you can make informed decisions.”

The engagement agreement is also a convenient way to provide the client with information about the lawyer’s preferred methods of communication.

“To expedite communications with clients, we routinely use unencrypted electronic mail. While the use of unencrypted electronic mail necessarily involves some risk of accidental disclosure of information, we have adopted a list of best practices to avoid the risk of inadvertent disclosure or loss of attorney-client privilege. If you do not agree to our use of email, please let us know and we will make alternative methods of communication available.”

Confidentiality and Preserving the Attorney-Client Privilege

Regardless of the method of communication used, communications between the lawyer and the client are protected by the duty of confidentiality. Furthermore, such communications may be subject to the attorney-client privilege. Lawyers must take reasonable care to protect the confidentiality of the communications and the attorney-client privilege by giving appropriately tailored advice to the client. The engagement agreement can provide clients with that advice.

“Please keep in mind that communications between our firm and you are generally confidential, regardless of the method of communication used. Furthermore, such communications may be subject to the attorney-client privilege, which means that neither you nor anyone from our firm may be called to testify about the nature and subject matter of our communications with you. However, that privilege can be lost and the communications required to be disclosed at trial if the communications are shared with a third party. In order to protect the confidential nature of our communications with you and the attorney-client privilege, we ask that you refrain from sharing or relating our communications to a third party.

“In the event you believe that communications with our office should be shared with a third party, we ask that you consult with the attorney in charge of your case before doing so. In that way, you and the attorney can determine what information should be provided to the third party, when the information should be provided, how the information should be provided, and whether that information should come from you or from the attorney. Given the ease of forwarding emails and voicemails, it is important to the success of your matter that you keep this policy in mind and resist the urge to ‘forward’ to or ‘copy’ third parties our communications with you.”

 Lawyers must recognize and take reasonable steps to protect against the risks of inadvertent or unauthorized disclosure that are unique and attendant to electronic communication. ABA Formal Ethics Opinion 11-459 (2011) warns that a lawyer sending or receiving substantive communications with a client via email or other electronic meansordinarily must warn the client about the risk of sending or receiving electronic communications using a computer or other device or an email account to which a third party might gain access. An engagement agreement can provide this information.

“We also advise you to refrain from communicating with us on any device provided by your employer or any computer, smartphone, or other device that is shared with someone else. In addition, when communicating with us, do not use your work email address or a shared email account. You should only use a private email account that is password protected and only accessed from your personal smartphone or computer.”

Social Media

SCR 20:1.4, the rule regarding communication with clients, requires lawyers to fully inform their clients about all aspects of their matter. This includes informing clients how their own actions might affect their case when it comes to participating in social media during the course of representation. Lawyers might want to advise clients to restrict access to their social media by changing the privacy settings. Advising clients, however, to close social media accounts or remove damaging information may be considered destruction or spoliation of evidence or obstruction of justice.

“We strongly encourage you to refrain from participating in social media [such as (provide examples)] during the course of representation. Information found on a social media website is not private, can be discoverable, and if used as evidence may be potentially damaging to your interests. Information posted online could result in a waiver of the attorney-client privilege if that information relates in any way to the legal matter in which we are representing you. In addition, you should not delete or remove information from any social media website before consulting us because that could be considered destruction of evidence, spoliation of evidence, or obstruction of justice.”

Depending on the circumstances, it may be helpful to refer in the engagement agreement to the law firm’s policies on social media. For example, let clients know that even though the firm’s lawyers might have Facebook pages and twitter accounts, they do not “friend” or “follow” clients. Explain that this is for the clients’ protection and security, and instead direct them to a Facebook fan page if the firm has one.

Conflicts of Interest

Information concerning conflicts of interest can be incorporated into the engagement agreement, or it can be put in a separate agreement. Some lawyers prefer a separate conflict agreement because it makes the engagement agreement less complex and because a separate conflict agreement facilitates obtaining the informed consent of the client. Even when there is no conflict of interest, it may be worthwhile to acknowledge that.

“We are not aware of any conflicts of interest arising from our representation of you and our other clients, former clients, other persons, or other interests. If a conflict of interest should arise, we will promptly disclose it to you and work together to resolve it.”

Client Responsibilities

Frequently, clients are not aware of their responsibilities to assist the lawyer in dealing with their matters. To prevent misunderstandings about the client’s expectations and responsibilities, it is helpful to state in the engagement agreement the client’s responsibilities. The responsibilities provision can range from a statement simply requiring cooperation to a more detailed statement of the specific responsibilities.

“To enable us to effectively represent you in this matter, you agree to fully cooperate with us in handling this matter, to fully and accurately disclose to us all facts that may be relevant to the matter or that we may request, and to keep us informed of any developments relating to the matter. You also agree to be reasonably available to attend meetings, discovery proceedings and conferences, hearings, and other proceedings.”

Solo Practitioner

SCR 20:1.3 requires lawyers to be diligent. For solo practitioners, this duty requires an emergency plan in case of unexpected death, illness, or disability. ABA Comment [5] states: “To prevent neglect of client matters in the event of a sole practitioner’s death or disability, the duty of diligence may require that each sole practitioner prepare a plan, in conformity with applicable rules, that designates another competent lawyer to review client files, notify each client of the lawyer’s death or disability, and determine whether there is a need for immediate protective action.” Thus, it may be helpful to include the following language in the engagement agreement.

“My objectives are to provide you with excellent legal services and to protect your interests in the event of my unexpected death, disability, impairment, or incapacity. To accomplish this, I have arranged with another lawyer to assist with closing my practice in the event of my death, disability, impairment, or incapacity. In such event, my office staff or the assisting lawyer will contact you and provide you with information about how to proceed.”

Limited Liability Entity

If the firm is organized as a limited liability entity, SCR 20:5.7(e)(2) requires that clients and potential clients be provided a “plain-English summary of the features of the limited liability law under which it is organized and of the applicable provisions of this chapter.” The engagement agreement is a convenient way to fulfill this requirement.

“[Firm name] is organized as a limited liability service corporation under the laws of Wisconsin. The firm is responsible for professional liabilities incurred by its attorneys. Each attorney also may be personally liable for any acts, errors, or omissions arising out of the performance of professional services. The firm maintains professional liability insurance as required by the Rules of Professional Conduct of the Wisconsin Supreme Court.”

Conclusion of Representation

Ordinarily, a representation is completed when the agreed-upon assistance has been concluded.³

“Unless previously terminated, our representation of you will terminate upon the conclusion of this matter, our written notice to you that the engagement has concluded, and the mailing of our final statement for services rendered in connection with this matter. Following the conclusion of the matter, any information you have supplied to us, which is retained by us, will be kept confidential in accordance with applicable Rules of Professional Conduct. All documents retained by the firm will be transferred to the person responsible for administering our records retention program.”

Termination of Services

SCR 20:1.16 governs termination of services. Lawyers, unlike clients, do not have unfettered discretion to terminate the lawyer-client relationship. SCR 20:1.16(b) provides various permissive grounds for withdrawal. The engagement agreement should inform the clients of their right to terminate the attorney-client relationship at any time. Clients also should be informed of the circumstances under which the firm may withdraw from representation. The engagement agreement can also include the lawyer’s obligations on termination such as taking reasonably practicable steps to protect the client’s interests, surrendering papers and property to which the client is entitled, and refunding any advance payment for fees or expenses that has not been earned or incurred.

“Because the relationship between the attorney and client is one of trust, it is essential that you feel comfortable and confident in my representation. You may terminate my representation of you at any time or for any reason by notifying me in writing. I may withdraw from representing you, after notifying you in writing, if I am unable to perform my ethical obligations to you, if we significantly disagree over the means by which your objectives are to be achieved and we are unable to resolve that disagreement, or if you substantially fail to fulfill your obligations under this agreement after being given a reasonable warning. If you terminate our relationship or if I withdraw from representation, I will take reasonably practicable steps to protect your interests, surrender to you or your new attorney papers and property to which you are entitled, and refund to you any advance payments for fees or expenses that have not been earned or incurred.”

File Retention and Destruction

It generally is recommended that former clients be given reasonable notice before their files are destroyed. A convenient way to do this is to include information about the firm’s file retention and destruction policy in both the engagement agreement and the closing letter. The information about the file retention policy should include which files will be copied and retained by the firm, how long after the conclusion of the matter the files will be kept, how the files will be destroyed, and what the client should do if the client wishes the firm to retain the files longer than the standard period.⁴

“All our records are securely retained in electronic files, along with secure backups, for 10 years. After 10 years, without further notice to you, your electronic file will be destroyed in a manner which preserves the confidentiality of your information. If you wish to have your file returned to you, please notify [us] [our firm] before the 10 years have elapsed, and we will promptly return your file to you.”

Arbitration of Fee Disputes

The manner in which a fee dispute between the law firm and the client will be resolved also can be included in the engagement agreement. Provisions in the engagement letter that require the arbitration of fee disputes are permissible if the provisions are fair and the client gives informed consent. An essential element of informed consent, according to ABA Comment [6] to SCR 20:1.0, is an explanation of the disadvantages to the client. ABA Formal Opinion 02-425 further explains that the lawyer should make clear that arbitration typically results in the client’s waiver of significant rights, such as the right to a jury trial, the right to broad discovery, and the right to appeal.

Arbitration clauses also must be fair. The Wisconsin Supreme Court held that a clause in a consumer loan contract requiring arbitration of disputes was unconscionable, in part because the clause required the consumer to submit disputes to arbitration but permitted the vendor to pursue other avenues of relief.⁵ While this case does not address a lawyer’s fee agreement, it does provide valuable information about arbitration clauses.

“If any controversy, dispute, or claim arises between us concerning our fees or costs, our firm and you agree to submit that controversy, dispute, or claim to binding arbitration with the Fee Arbitration Program of the State Bar of Wisconsin [or other arbitration program]. You acknowledge that by agreeing to arbitration, you are giving up certain rights that would be available in a civil trial, such as the right to a jury trial, the right to broad discovery, and the right to appeal.

Closing

This paragraph provides a good closing tone.

“I greatly appreciate your confidence in me and the opportunity to work with you. If you agree with the terms of this agreement, please sign below and return a copy to me in the envelope provided.”

Client Acknowledgement and Signature

This provision indicates the client’s acceptance of the agreement.

“I [We] have read, and I [we] understand and agree to the terms and conditions of this agreement.”

Endnotes

¹ Lawyers refer to “engagement agreements” in many ways, such as “fee agreements,” “legal services agreements,” “representation agreements,” or “retainer agreements.”

² Wis. Ethics Op. E-09-03.

³ See SCR 20:1.16 ABA Comment [1].

⁴ For more information, see Wisconsin Formal Ethics Opinion EF-17-01, Retention and Destruction of Closed Client Files.

⁵ Wisconsin Auto Title Loans Inc. v. Jones, 2006 WI 53, 290 Wis. 2d 514, 714 N.W.2d 155.