Fixed Fee Agreement: Everything You Need to Know
A fixed fee agreement is used to provide legal services for those who do not have the funds to afford an attorney.3 min read
2. Advantages and Disadvantages of Fixed Fee Agreements
A fixed fee agreement is used to provide legal services for those who do not have the funds to afford an attorney. This type of agreement cannot be used to avoid the basic relationship between clients and attorneys. To avoid any issues, fixed fee agreements should be labeled with either earned on receipt or nonrefundable, or both.
If these terms are used, the agreement must meet the ethics rules at the time the agreement is being drafted and when selecting the account where funds will be deposited. If fixed fee agreements already exist, they should be reviewed at the beginning of the year to confirm they meet the newest rules.
A required written fee agreement must include:
- The rate or basis of the fee. This is used to establish the cost that will be incurred by the client and to avoid misunderstandings.
- A list of services that will be given as part of the agreement.
- Additional services that are outside the scope of the agreement may be listed with an associated hourly rate.
It is expected that lawyers using a fixed fee agreement will provide competent representation, possess the skills needed for the case presented, be thorough in their work and be fully prepared. It is also expected that the client complies with the agreement including the use of time for calls and meetings.
Oregon Rule of Professional Conduct
- Funds won't be placed in a lawyer trust account.
- Clients, at any point, are allowed to end the relationship and agreement with the lawyer. At this time, they may be eligible for a total or partial refund of the amount paid, as long as the services have not been completed.
Oregon rule also prohibits any dishonest conduct or misrepresentation by the lawyers. Also, the word refundable, while allowed, should be used with caution to avoid misunderstandings. If a fixed fee is charged, but not labeled as nonrefundable or earned on receipt, the fee is seen as client property. As client property, the payment must be put in a lawyer trust account. It can only be withdrawn when the case is complete according to Oregon RPC 1.15-1(c). The fixed fee agreement amount must not be seen as excessive. The fee must be in line with the amount of time, number of employees and skills required to complete the case.
The agreement should not include any clauses that allude to the fee changing without any notice. If any modifications are in the agreement that shows a benefit to the lawyer, a detailed explanation must be included and it is expected to be seen as fair.
Advantages and Disadvantages of Fixed Fee Agreements
Advantages of agreements with fixed fees include:
- The attorney can set the value associated with the service.
- The client can limit the cost of legal services at the beginning of the case.
- Fee disputes are minimized by being set upfront.
- The expectations associated with the representation is documented upfront which limits future issues.
- Fees may be collected at the time the agreement is put in place.
- Fixed fee agreements can be a good way of obtaining new clients.
Disadvantages of agreements with fixed fees include:
- If the case is more complex and takes more time than expected because the details of the case were not fully reviewed at the beginning.
- The client adds important facts to the case that are pertinent after they have signed and paid the retainer.
- The client abuses the agreement by expecting services at all times.
- The client expects legal counsel to be provided on multiple legal situations, not just on the case that is detailed under the agreement.
To avoid the disadvantages, expectations should be set in the agreement and with the client directly. This can include when they are permitted to call for updates, how many and when meetings will take place and that any additional facts submitted by the client will create additional hours and payment.
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