This article is written by Michael Shriney from the Sathyabama Institute of Science and Technology. This article explains everything about retainer agreements, its fundamentals, need, purpose, kinds, and a template of the agreement.
It has been published by Rachit Garg.
Table of Contents
A retainer agreement is a long-term contract in which a client hires a lawyer to represent him or her in one or more situations. Advocates and attorneys are the most common users of retainer agreements. They charge their clients on an hourly basis through an agreement that is divided into two types of contracts: work-for-hire and pay-for-access. The client will employ a lawyer to assist them in representing their problem in court and to provide legal advice. This agreement is in place to safeguard and secure the legal services of the attorney. The attorney fees and other considerations must be addressed in a retainer agreement. The following article goes through the entire structure as well as further information on retainer agreements.
What is a retainer agreement
Retainer agreements are long-term contracts to retain ongoing services, and they are contracts between a company or a client. They fall between a one-time agreement and a permanent employment contract. It’s a contract between a firm or a person and a client in the form of a paper or a service contract. It allows clients and customers to pay in advance for the services rendered by an individual or a company’s professionals. The retainer agreement is mostly used for the service rendered by attorneys on an hourly basis, which they charge to their customers.
Essentials of a retainer agreement
- Written agreement: A retainer agreement must be documented properly. It should be written and should cover the entire client-attorney agreement’s terms & conditions.
- Nature: The agreement must be simple and clear. For the client to grasp the contract effectively, the words must be written in a simpler format.
- Duration: The period of the contract must be specified.
- Fee: The attorney charges a fee for the services he or she provides to the client.
- Additional charges: Any additional fees or expenditures must be included in the contract so that the client understands exactly what they are responsible for.
- Subject matter: The agreement must specify the topics that are addressed. It is required to specify the subject matter concerns for which clients have requested solutions or assistance.
- Misrepresent: The agreement shall not misrepresent clients about the services covered by the agreement in any manner.
- Usage of funds in a proper manner: The attorney must make good use of the funds received from the client.
- Separate account: Attorneys and advocates are encouraged to set up a separate account for cash received from clients. They should not execute this agreement using their personal account. It is important for the attorney to create a separate account that is only for the benefit of the client and not for personal gain.
Need of a retainer agreement
The major reason for the requirement for a retainer agreement is to protect the legal profession, attorneys, and advocates, for example. It’s similar to a doctor providing treatment to a patient after the patient pays for the medical bills, which is a future service; similarly, advocates are compensated by the client for the service they will provide after the client pays for the expenses. It promotes income stability and improves client relationships. A retainer agreement is in high demand for legal services, consulting services, and freelance work. This contract can be utilized for consultants, who will be working for a longer length of time. Using this agreement, the advocates gain popularity. As a result of this agreement, professionals will have more opportunities in the legal profession. It’s a method to have a stable income for a long time.
Purpose of a retainer agreement
The retainer agreement’s goal is to ensure that the advocates do not mislead or take the client for granted. It is designed to protect both the client and the advocate. In the case of an advocate, they are compensated by the client for their services. Similarly, in the case of a customer, they receive a solution to their difficulties in exchange for payment for the advice and solutions provided. When it comes to retainer agreements, they are both in the safe zone. All specifics, including when the period begins, the cost per hour of services, the total amount, the problem, reasons, and remedies are to be included in this agreement.
Types of a retainer agreement
There are two sorts of retainer agreements: those for the number of hours worked and those for access to experts.
- Work-for-hire retainers
With work-for-hire retainers, businesses expect to receive regular payments from their clients on a monthly basis. This sort of agreement speaks for itself, and it begins with their client and advocate connections. This is often used as a general agreement. The consultants are paid for the number of hours they worked, which is similar to a project or a contract. They’re always in the loop to provide services to the client.
- Pay-for-access retainers:
This kind is required for more experienced consultants, who would wish to pay for professional advice and information on an ongoing basis. It’s not like the old work-for-hire retainers based on hours and rupees that were expected to be a transaction. When a client believes in the value of the services their advocate provides, their service must be extraordinary, rather than being maintained on a regular basis. It is helpful for the customer to have faith in the advocates who are providing the services. The client will pay for the information and value experts provide, not for the number of hours they work. The client may rely on high-quality services.
How to draft a retainer agreement
A retainer agreement is a legal document that covers both parties as well as legal consequences in case of default. For really understanding the consequences of entering into a retainer agreement, and assisting in the execution of a legitimate agreement that can be legally enforced by law, it is essential to have solid documentation provided by the advocate. The advocate will guarantee that both parties interests are safeguarded. They reach an agreement in order to reduce the risk of a conflict. The skilled attorney will draft a detailed contract that includes all terms and conditions that may emerge between the parties in the future.
The procedure of drafting a retainer agreement is as follows:
Step 1: Obtain a duplicate of the retainer template
An employment agreement with a retainer must be included in the agreement, which may be saved as a pdf, word, or ODT file. It is beneficial to have a copy of the agreement template on hand, so that the advocate may refer to it and draft their own agreement.
Step 2: Describe the client, the retainer, and the services they provide
After receiving the retainer draft, the client will be able to complete the agreement by filling in the blank spots. It is intended that the vacant spaces will be filled in by typing. All blank spots in the agreement must be filled in, including the name, date, location, and nature of the problem.
Step 3: Mention the length of service and when it will expire
Following the introductory section of the document, here, the advocate needs to fill in the time when the agreement starts and under what circumstances the agreement would be terminated.
Step 4: The amount to be paid or the document that will be used to make the payment
The amount to be paid or compensated must be clearly stated in the draft agreement, i.e., whether it is a work for hire agreement or pay for access agreement. The client’s approval for the payment is important.
Step 5: The information needed to resolve the conflicts must be given
Regardless of how great the agreement is, there is a possibility that the parties may have disagreements. Both sides must speak with one another in order to avoid a future conflict beforehand. To avoid future disagreements, the professional drafter should specify all conditions.
Step 6: Signatures of both the professional and the client are necessary
Both the professional and the client must sign to recognize that the above-mentioned agreements are accurate and that they are obliged by them. This is the final stage in the agreement drafting process.
How are fees decided in a retainer agreement?
The payments in retainer agreements are determined by the advance charged to the clients for the professional services of an adviser, consultant, lawyer, freelancer, and so on. The payments are mostly connected with advocates or attorneys who assist legal services to clients. This charge is intended to secure the agreement for the services delivered. After both the payer and the receiver have approved the agreement for the service to be completed, the fee must be put into a separate or different account rather than the receiver’s original account to guarantee that these funds are not used for various uses.
How to negotiate a retainer agreement?
In order to negotiate a retainer agreement, consulting a professional for advice on their dispute is to make an attempt to obtain a retainer client from negotiating an agreement that is appropriate for both parties on adopting the retainer-based payment in their management system. The following situations help retainers in obtaining clients.
Establishing the worth of a retainer agreement
These retainer agreements, which are signed by both parties, are important in the negotiation of an agreement. It will take many years to maintain genuine connections and a professional reputation as someone who provides their expertise and accomplishes good solutions. Professionals who have established a strong reputation in their field by working hard and serving a small number of clients might take advantage of this chance to negotiate their contracts with clients.
Providing discounts to clients
Clients are given discounts because they wish to protect themselves from professionals by signing retainer agreements. Some clients will pay in advance if the specialist is in high demand. Client discounts will encourage clients to seek professional advice more frequently if there is a discount.
Specialists must assure clients that their problems will be solved by proving that professionals should keep their promises to their clients. This makes an impact on the professionals to excel and get more clients by demonstrating that they can handle their clients’ concerns.
Advantages of a retainer agreement
The following are some of the advantages of using a retainer agreement:
- A fixed-fee retainer with a retainer agreement maintains continuity.
- The benefits of a retainer agreement include a steady price from the client and a long-term connection with the client. They do not waste their time on marketing.
- This agreement guarantees that specialists will be available when the client requires assistance.
- As they have agreed on a retainer price over a lengthy period of time, there will be sufficient cash flow maintenance.
- The professional is paid on a regular basis, which allows them to focus effectively on the client’s demands and produce high-quality work.
Disadvantages of a retainer agreement
Although the retainer agreement between the customer and the expert has benefits, it also has drawbacks. The following are some cases:
- Clients are given a certain amount of time to devote to their difficulties by the professionals.
- Professionals stick to a strict timetable, which is inconvenient for the clients.
- Professionals enter into hourly commitments, which is challenging.
- It is tough for professionals to find clients; they must work hard to find clients.
- Professionals find it difficult to seize opportunities that come their way. If the opportunity arises, the experts must prove to their clients that they are capable of assuring and resolving their issues.
- In the case of professionals, there is a possibility that they will only acquire rare clients.
- In case of innocent clients lose a lot of money investing in their issues, even when it is obvious that there is no way to remedy them. They also pay the professionals in advance without receiving any service.
Mistakes to avoid while drafting a retainer agreement
The following points must be kept in mind to avoid mistakes while drafting a retainer agreement:
- In drafting a retainer agreement, it is best to avoid using confusing or unclear terms.
- Avoid using complicated languages.
- Requiring clients to pay more than the value of the service provided should be avoided.
- For the dispute, insufficient information presented must be avoided.
- Not stating all the factors that will lead to the termination of the agreement. This should be avoided.
- There is no provision for resolving disputes, which seems to be a drafting error that must be avoided.
- Proofreading and proper formatting are not clearly drafted. This mistake must be avoided.
- Instead of offering an appropriate solution to the problem, advocates do not provide a proper remedy to their party’s dispute. These activities must be avoided.
- Professionals should avoid using cash for personal purposes.
Sample format of a retainer agreement
This Agreement acknowledges the employment of the _______________ Law Office, and ______________ (hereinafter “Attorney”) by ______________ (hereinafter “Client”) and the fee arrangement by which Attorney will represent the Client in the following matter or proceeding: Divorce (subject matter)
The client understands that the Attorney cannot guarantee the results of any proceeding and acknowledge that no representations have been made by the Attorney about the outcome of this matter.
Legal Fees: Legal fees for representation of Client in this proceeding are based upon the following hourly charges:
Paralegal or Legal Assistant Rs.___________
The client will be charged at the above rates for all time spent on this matter. Hourly charges may be increased during January of each year, and the Attorney will provide the Client with reasonable notice of any such increases. An upward adjustment may also be made to the normal hourly charge for special demands made upon the Attorney including difficulty, whether the work is of an emergency character, results achieved and inability to represent other clients.
Costs and Expenses: In addition to legal fees, the Client is responsible for payment of costs incurred and disbursements made on Client’s behalf including, but not limited to, photocopying costs, long-distance telephone charges, postage, and fees and expenses for any experts hired on the Client’s behalf. The client agrees to pay all of the expert fees and expenses in advance. The client specifically understands that the Attorney will not advance any expert fees and expenses.
Retainer: A retainer of Rs.____________ is required, prior to commencement of any legal services for Client. The retainer will be applied against future billings. An attorney will refund the unused portion, if any, of the Client’s retainer upon completion of all work on the Client’s file.
Payment of fees: The client will be responsible for the prompt payment of all fees and costs incurred in excess of the retainer. Payment is due immediately upon receipt of the billing statement unless other arrangements have been made in writing. Charges not paid by the last business day of the billing month are considered delinquent and will bear interest at the rate of eighteen percent (18%) per annum, or the maximum rate allowed by law, whichever is less. In the event, the Attorney must take legal action to collect the Client’s account, the Client expressly agrees to pay all collection costs, including reasonable attorney fees.
Services to be performed: Attorney will charge Client for services which will include, but are not limited to, the following: (1) telephone contact with Client, Attorneys, and other relevant persons; (2) case correspondence; (3) document preparation; (4) legal research; (5) office conferences; (6) court appearances; and (7) travel time to and from locations away from the Attorney’s office. Services are billed to the Client on the basis of time expanded. Each party to a legal proceeding has certainly available alternatives which will affect the amount of time and money expended in the proceeding. Since the time spent on each matter varies, as does the nature and amount of work necessary to achieve the desired result, the Attorney makes no estimate as to the extent of the legal service or the total amount of fees and expenses which Client’s case will require. Unless otherwise expressly stated in this Retainer Agreement, representation does not include an appeal of your case.
Costs of copying file: Attorney will provide Client with contemporaneous copies of all pleadings and correspondence when they are received or sent by Attorney.
Withdrawal of Attorney: Client understands and expressly agrees that Attorney may withdraw from representation of Client at any time, if Client fails to honour the fee arrangement therein set forth including, but not limited to, payment of fees and expenses on a timely basis; fails to cooperate in the preparation of the case; fails to make a full and complete disclosure of the facts and circumstances relating to the case; or otherwise takes any action which impedes the ability of Attorney to provide adequate and ethical representation.
THIS RETAINER AGREEMENT CONSTITUTES A LEGALLY BINDING CONTRACT BETWEEN ATTORNEY AND CLIENT. THE ATTORNEY ADVISES THE CLIENT TO READ THE RETAINER AGREEMENT CAREFULLY AND TO DISCUSS ANY QUESTIONS OR CONCERNS REGARDING THE TERMS OF THE RETAINER AGREEMENT.
I hereby acknowledge that I have read this Retainer Agreement and have discussed any questions or concerns which I have regarding this Retainer Agreement and have received a copy of the same. I agree to retain an attorney in accordance with the terms and conditions of this Retainer Agreement.
Date:____________ Client ___________________
In consideration of the foregoing, I hereby agree to provide representation in the above matter.
Date: ____________ By _____________________
Law firm: Attorney
This article sums up with a short overview of the retainer agreement. This agreement is primarily for advocates and attorneys to receive compensation for services rendered to their clients in two forms: one for the number of hours worked for which a fee will be charged, and the other for the advocates’ knowledge and intelligence in resolving disputes. This agreement establishes communication between the parties and the advocate which is beneficial to both the parties.
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