I am still amazed when firms say they don’t use an engagement letter, or don’t use one most of the time, especially on repeat business with a client. My response is usually, “Why not?” After all, the letter can be pretty much boilerplate, so we are not talking about a huge effort in crafting something brand new. Obviously, a letter needs to be tailored for the area of practice and the purpose of services. Each new engagement also provides an opportunity to review and revise the letter to strengthen preventative protections against legal malpractice claims.
We have seen too many examples where a signed engagement letter would have given the lawyer solid footing to defend what was done or, in some cases, not done. It is critical when, or if, disputes arise to have a signed agreement regarding the scope of services to be provided, what is not to be provided and what is agreed regarding fees.
In the least, the letter should establish clear expectations for both the client and the lawyer. Included in the engagement letter should be provisions such as:
- Scope of services
- Fees and payment terms
- Method of communication between the firm and client
Additionally, a signed engagement letter that includes a final payment provision keeps everyone from trying to win a “he said, she said” situation. The timing of the final payment provision can be tied to an event such as the closing of a proceeding where final payment is due in full.
Lastly, there is an often-overlooked provision that should be included: the disengagement provision. This defines when and how the attorney/client relationship can be terminated. Nobody likes to think about ending a business relationship before the conclusion of a matter. However, it is critical to define the mechanism that provides the disengagement from a ridiculously difficult client before the fractured relationship goes completely off the rails.
I don’t have any doubts that a well-crafted engagement letter helps mitigate malpractice exposure. Steering clear of the common sources of a legal malpractice claim can make the practice of law much more enjoyable.
Author
Phil has been at OAMIC since 1989 and has served as president and CEO since 1993. He is past-president of the National Association of Bar Related Insurance Companies (NABRICO) and currently serves as secretary of the organization. He also serves as secretary of the Bar Plan Surety & Fidelity Company, is a board member of the National Association of Mutual Insurance Companies (NAMIC) and is a member of the Professional Liability Underwriting Society (PLUS). Phil has a Bachelor’s degree from Central State University (now University of Central Oklahoma) and is chair of the Edmond Economic Development Authority.