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Are Traditional Retainer Agreements Outdated?

Carolyn Elefant over at the MyShingle blog has an interesting post and related links concerning well-drafted retainer agreements.  It is true that in personal injury cases, retainer agreements remain critically important if you wish to collect your fee.  But in commercial and most other transactions, I wonder whether the traditional formalized retainer agreement is outdated, unnecessary and otherwise creates an unnecessary barrier to actually doing business with a client. 

At Traverse Legal, PLC, we essentially offer clients a money back guarantee.  If they’re not happy with a particular project, then they simply don’t pay.  We would not work with them again in most instances.  If we really did screw up, then we shouldn’t get paid anyway. 

We’ve only had two instances in four years where a client was unsatisfied with the deliverables we provided for the flat fee quoted.  In both instances, we returned the entire fee and sent the client on their way.  These were clients which we concluded would never be happy under any circumstances.  Some companies simply beat on vendors as part of their business model. 

Our retainer agreement consists of an email which defines the deliverables and quotes the fee.  The client responds to the email indicating that they wish to proceed forward.  We generate an invoice allowing the client to “pay now” by PayPal, credit card or other banking transaction.  Most of our clients retain us and pay their flat fee within hours of first contact. 

Essentially, we have eliminated the barriers to actually starting our business relationship with clients.  The formalized and traditional retainer agreement has numerous drawbacks.  First, it is a paper document which raises challenges in the digital world.  At best, you would email or fax the retainer agreement to a client, who would have to print it out, sign it and fax it back.  Some companies may require the client to provide an original signature before they’ll start work.  Many clients become extremely intimidated by the language of the retainer agreement which, of course, has all sorts of legal jargon imbedded in it.  Some clients will even take the retainer agreement to another attorney for review.  Once your focus is no longer on ensuring that you collect the fee, you can start seeing the potential of getting clients signed up and starting their project in real time.  Remember that most clients contact attorneys because they have a legal issue which is extremely pressing.  All of the hoops that law firms put in front of clients to jump through before they can even provide assistance seems, to us, unnecessary. 

As always, your thoughts appreciated. 

Comments

Eric Cooperstein

This is probably a workable idea for a niche practice, particularly for transactional work, although in many jurisdictions you would have a difficult time accepting a flat fee in advance without the client's written consent and some disclosures (unless you're willing to keep the funds in the trust account until the work is completed). It would be difficult to implement in other practice areas. Sometimes a representation agreement is required (e.g. workers comp, social security, bankruptcy). Michigan, in fact, is considering amendments to its ethics rules to require fee agreements in all "new" representations for over $1,000 in fees. That's unfortunate, because I think lawyers and sophisticated clients should be able to experiment and choose fee arrangements like the one you have implemented.

Dissatisfied clients present greater challenges for some lawyers. In other areas of practice, the client is almost never happy (family, criminal) so a money-back guarantee is likely to leave the lawyer with the short end of the stick. But if it works for your client base, it's a very customer-friendly policy and I'll bet it gets your representation off to a great start.

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