FEE AGREEMENTS
An Alternative to the Hourly Fee Arrangement
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Fixed-fee or set-fee arrangements have many advantages for both lawyers and clients. Regular work and cash flow are benefits to lawyers, and the predictability of cost benefits the clients. More time spent with clients absent the pressure of a running meter results into a better understanding of the client’s needs and challenges. It might lead to opportunities for serving other legal needs of the client. Fixed fees might also be desirable because:
• Clients are concerned about cost of legal services especially in this economic downturn. Clients want results, not time. They don’t want surprises but predictable costs. The standard concern to lawyers’ fees is uncertainty. Is a fixed-fee the answer? Sometimes, but depending on the client’s needs and legal issues.
• A fixed-fee arrangement usually entails most of client’s work, all of the client’s work in a practice area, or repetitive transactions in which the work being done and the time it will take are predictable from past cases. In other words, we believe (1) fixed fees arrangements can be an incentive to long-term, loyal, high-volume clients; (2) present an opportunity to negotiate for other work at premium fees from the client if favorable results are achieved under the fixed-fee model; and, (3) increase the opportunity for more positive client interactions.
Individuals and small-business owners in Lincoln and Nebraska need lawyers, and want results. They want to know the cost to achieve those results. Rather than quoting an hourly fee, an option is “This case will cost you $3,750.” There are variables are outside the lawyer’s control that affect the cost of representation. Fixed fee arrangements should provide alternatives if contingencies arise that change the amount of work involved (added parties, for instance).
Standard attorney-client fee agreement or engagement letters could include a timeline of events, a target date for disposition, estimated fees, and the likely maximum fee. The expected fees payable at each stage of the matter are included. A road map of sorts for the client and legal staff with details and timelines. Status reports could accompany file-stamped copies, which mention events outlined in the case plan. If contingencies occur and a fee increase is needed, the plan discloses what has happened and the change order for additional fees.
The bottom line is lawyers need to keep revenues above expenses to operate at a profitable level. Lawyers can then focus on bringing in new matters.
We make money by doing what we do best, practicing law. An operative question can quality legal services be provided in a timely, efficient, and cost-effective manner? A repeat client with similar legal projects is a logical fit. A client with a variety of legal needs may not be. An individual with a specific need for a lawyer’s service on a one-time basis may appreciate a set fee (For example: small estate plan - simple Will, Durable Power of Attorney, Health Care Directive).
Misunderstandings about fee arrangements might not surface until payment is due. Do not wait until losses pile up to address intake and pricing procedures.