A retainer is an advance payment you give to a lawyer before they take you on as a client. The fee secures the services of the lawyer and also shows a willingness on your part to hire and collaborate with them. The relationship between you and your lawyer gets established through a retainer contract. The agreement details the different expectations and obligations involved. In most retainer agreements, you discuss these details with your lawyer before you finalize the document is finalized.
- 1 Retainer Agreements
- 2 What is a retainer agreement?
- 3 Retainer Contracts
- 4 How do retainer contracts work?
- 5 Types of retainer agreements
- 6 Attorney Retainer Agreements
- 7 How to write this agreement?
- 8 Service Retainer Agreements
- 9 Setting up your retainer agreement
- 10 Is a retainer agreement legally binding?
What is a retainer agreement?
An attorney retainer agreement is a legal work-for-hire document between a lawyer and a client, whether it be an individual or a company. It can either be a permanent contract or a one-off contract. Having the agreement obligates you to pay upfront for the professional services of your lawyer. Instead of a lawyer, the other party can also be a company or some other professional.
The main purpose of the contract is to set the obligations of both parties so that you have an agreement on the services to provide, how to provide the services, when to provide the services, and the costs. This agreement is commonly used in hiring freelancers and lawyers. The fee ensures that the hired professional will reserve time for you when you need them. The contract is a long-term work-for-hire agreement and may involve ongoing work or services.
How do retainer contracts work?
A service retainer agreement doesn’t work like a one-type-fits-all formula as it involves many factors. But there is a basic structure you can follow when creating one. Take, for instance, one party, a contractor, who agrees to provide a client with an agreed-upon number of hours every month.
In exchange for those working hours, the client pays a fee in advance to the contractor. This is the retainer fee. After the contractor completes the work, the retainer fee applies to what the client owes the contractor and other extra hours they rendered as well.
The use of these agreements has increased as service industries require more stability in their income. They are also trying to improve their relationships with customers. These agreements are commonly used for accounting services, consulting services, legal services, and freelancers. The benefits of having this agreement include:
- Most one-off contracts don’t come with a stable income for a company or an individual. But a retainer fee that comes with the retainer agreement ensures stability.
- After a one-off contract comes to an end, professionals and freelancers need to search for new clients. Marketing commitments are also high in these kinds of contracts. But with a stable agreement, professionals can benefit from the fee from the client and the long-term relationship it establishes.
- Since a retainer agreement comes with a long-term relationship, it ensures that professionals will always be there for you when you need them.
- All retainer agreements include an agreed-upon fee over a long time period. Since you have already set the fee, it becomes easier to maintain cash flow.
- With the agreement, professionals receive payments continuously. This allows them to focus on your needs and provide high-quality work.
However, retainer agreements also come with some disadvantages, although most professionals and freelancers agree that the benefits outweigh the downsides. Here are the drawbacks of this agreement:
- Since the retainer agreement requires professionals to commit to a set number of hours for you, they have to stick to a set schedule.
- Since professionals have to follow the set schedule, they might miss other opportunities that come along.
- You would also take a risk when you enter into a retainer agreement. You pay for the services of a professional that you haven’t received yet. You would also have to pay for services in the months when you don’t need those services, thus losing some money.
Types of retainer agreements
If you have a consulting retainer, the person you hire will send you a bill each month as stated in the agreement. The decision on how you cooperate further depends on how skilled the professional is, how long you have worked together, and your relationship with each other. In consultancy businesses, there are two types of retainer agreements to choose from:
- Pay-for-work retainer agreement. With this type of retainer, the company or individual will receive continuous payment every month from you as the client. This is a basic agreement that’s common with consultancy services. It starts with the relationship the professionals have with their clients. The professionals receive payment for the hours they render, which is almost similar to a project or contract. They only differ in one aspect – the professionals must deliver services to you continuously.
- Pay-for-access retainer agreement. This type of retainer agreement is for more advanced or experienced professionals who prefer to receive payments for providing their knowledge and expertise continuously. Unlike a pay-for-work retainer agreement, this one doesn’t anticipate the trade between dollars and hours. Instead, you retain the professional on an ongoing basis because you trust them for the exceptional service they provide. Your belief in the professional you’ve hired is very strong and need to decide if you prefer to have access to them.
Attorney Retainer Agreements
How to write this agreement?
You use a general retainer agreement to contract the services of a professional like a lawyer for a set time period. You pay for the availability of the professional, or at least for their preferred attention within the time period you agreed upon. Therefore, you can expect their services when you need them. A retainer fee agreement is very common these days and it involves paying a lump sum or deposit fee upfront, which you place in a trust account. The professional can withdraw from the account each time you call them to work for you.
Retainer fees aren’t intended to cover the whole cost of the representation. For instance, a lawyer could refund you for any leftover money in the account after the retainer agreement comes to an end. The style and length of the agreement vary for every case, although there are basic elements that you should include, regardless of the type of case or jurisdiction. These elements are:
- The scope of work
- The nature of the work
- What do you expect the professional to do for you throughout the duration of the agreement. Remember that there is a difference between the requirements of an organization that needs a lawyer when drafting this contract and an individual who wants to win a case. The document can also contain detailed actions that the lawyer won’t have to do.
- The retainer fee is the amount that the professional charges you. The agreement should include a detailed summary of the basis of the fee. If appropriate, you may also include specific examples. For instance, you may include the details of any flat fees for specific projects or cases.
- Include your expenses as the client too. You would be the one who pays for some of the expenses, especially things like travel costs and filing-related costs. The agreement must specify all of the expenses that you need to pay, no matter what the outcome is.
Aside from these basic elements, the document can also include a comprehensive description of the other parts of your professional relationship. Adding necessary clauses prevents any confusion or disputes that might arise in the future.
Make sure that the wordings you use in these clauses are both clear and simple. If this is the first time you work with a lawyer, it’s recommended to be as comprehensive and exhaustive as possible. Additional terms to include in the agreement are:
- A means for fee arbitration in case a dispute arises.
- The professional’s expectations towards you in terms of communication and cooperation.
- A statement about the professional’s right to withdraw.
- Your right to terminate the agreement.
- A statement about any intention to use a paralegal, contract lawyer, or associate for additional expenses and services.
- A statement about no guarantee of the outcome.
- Details about conflict checks.
In almost all legal cases, lawyers have a standard template ready. Even so, it’s a good idea to go through all of the details of the agreement before you sign. Also, remember that you have the right to negotiate the details of the agreement and refuse any terms you don’t agree with.
Service Retainer Agreements
Setting up your retainer agreement
You should consider the structure of your retainer agreement, especially in terms of how you will structure the work or services you want to receive. You can do this in the following ways:
- By hour
For this, you set a specific number of working hours every month. Make sure to establish what happens to any hours that you won’t need. For example, you could provide a quotation of 10 hours of work each month. If you won’t need all those hours, you have the option to carry over the unused hours to the next month.
- By deliverable
You would require the professional to deliver a specific number of services or products every month. The agreement should also specify what happens if you require additional work and how you come up with the pricing for the extra work.
- For access
There may be instances when you would pay a fee each month for access to the professional’s services. This fee serves as the base pay. The professional may also charge hourly fees. Although this is a common practice for law firms, most freelancers don’t usually agree with this charging method.
A great way to increase the chances of a professional accepting the terms of your agreement is to base their scope of work on what they are presently doing for you. Often, retainer agreements have monthly terms where you would pay the professional on the last day of each month.
After establishing the work structure you expect from the professional, it’s time to determine how to set the fee. The important thing to remember is to offer a reasonable fee that will make the retainer more appealing without short-changing yourself or the professional. If the professional offers you a discount, that would be good news for you!
You also need to specify how you will pay for any extra work the professional will provide. Often, professionals offer discounts for such situations. This might mean losing money on their side, especially if your project goes over the agreed-upon time period. A better alternative is to accept the professional’s usual rate and agree to increase the fee if you need them to go beyond the agreed-upon time or amount of work regularly.
Another key thing when working on the agreement is the duration or length of the agreement. This partially depends on the type of project you expect the professional to accomplish. For example, if the project takes over the course of 2 to 3 months, having a 3-month retainer makes sense.
When you have the professional on retainer for a couple of months, you can consider proposing a longer agreement. You can add incentives by offering higher pay for extra work, especially if you need them to work beyond what you agreed on originally. Make sure to include these new terms in the agreement.
Finally, you should also talk about how to handle vacation times. Outlining the professional’s vacation time should be part of your agreement. For example, if the professional takes two weeks’ vacation regularly, like every December, specify this in your agreement. To avoid any issues, you can create a plan for the timeline along with how much work the professional will do each month until their vacation.
Is a retainer agreement legally binding?
In many jurisdictions, it’s a requirement, or at least it’s highly recommended to have a retainer agreement when getting into contracts with professionals. This is a legally binding document. But there are no laws that require retainer agreements for lawyers and clients who undertake a general retainer relationship. This especially applies in cases where a professional has rendered similar services to you and you have already paid for such services.