Firms use retainer agreements to secure their relationship with a client and to document the terms of that relationship. A retainer agreement outlines the services the firm will provide to the clients and how much they will be paid for those services. The agreement also sets out the payment schedule and any other conditions of the relationship. This article provides an overview of retainer agreements, including what they are, what should be included in them, and some common issues that can arise with them.
What is a Retainer Agreement
A retainer agreement is a contract between a client and an individual or organization, typically used when the client requires ongoing services. The agreement outlines the terms of the relationship, including the duration of the engagement, compensation, and any other conditions.
Retainer agreements are common in many professions, including law, accounting, consulting, and web design. Many businesses require retainers because they provide a consistent source of income and allow businesses to plan for their future work.
There are several key features to a retainer agreement:
- The agreement should be in writing and signed by both parties.
- The agreement should identify the services to be provided.
- The agreement should specify the duration of the relationship.
- The agreement should detail the compensation arrangements, including any advance payments, hourly rates, or other fees.
- The agreement may include provisions for termination of the relationship.
When drafting a retainer agreement template, it is important to consider all of these elements and tailor the document to fit your specific situation. You may also want to consult with an attorney to ensure that the document meets your legal requirements.
The Different Types of Retainer Agreements
There are four different types of retainer agreements:
- Hourly: In this type of agreement, the client pays the lawyer for each hour worked on the case. This is the most common type of retainer agreement.
- Flat fee: A flat fee arrangement means that the lawyer charges one set fee for their services, regardless of how much time they spend working on the case. This type of agreement is typically used for simple cases or when the lawyer is confident they can resolve the matter quickly.
- Contingency: In a contingency arrangement, the lawyer agrees to take a percentage of any money recovered from the opposing party as their fee. This type of agreement is typically used in personal injury cases where there is a potential for a large financial recovery.
- Hybrid: A hybrid agreement is a combination of hourly and contingency arrangements. The lawyer charges an hourly rate for their work, up to a certain amount, and then takes a percentage of any money recovered above that amount.
The Components of a Retainer Agreement
There are a few key components that should be included in any retainer agreement template, including:
Description of services: The lawyer should outline the scope of their services in detail. This will help prevent misunderstandings about what the lawyer will and won’t do for the client.
Fees and expenses: The agreement should spell out how much the lawyer will charge for their services, as well as any other expenses that the client may be responsible for.
Payment schedule: The agreement should include information about when and how the lawyer will be paid. This can either be an hourly rate or a lump sum payment.
Cancellation policy: The agreement should outline what happens if either party decides to cancel the agreement. This can include a clause that requires the client to pay the lawyer for any work that has already been done.
Confidentiality: The agreement should contain a confidentiality clause that prohibits either party from disclosing information about the case to anyone outside of the attorney-client relationship.
Scope of work: The agreement should outline the specific tasks that the lawyer will be performing for the client. This can include things like research, drafting documents, and appearing in court.
Issues with retainers: Retainer agreements can be expensive and may require a client to pay upfront for services that have not yet been rendered. It is important to make sure that you are comfortable with the terms of the agreement before signing it. You should also be aware that retainers are non-refundable, so if you cancel the agreement or terminate the attorney-client relationship, you will not be able to get your money back.
How to Create a Retainer Agreement
The first step is to decide what tasks you will be performing for the client. This will be outlined in the scope of work section of the agreement.
The second step is to determine how much you will be paid for each task. This can be a fixed fee, an hourly rate, or a combination of both. Be sure to include any expenses that the client will be responsible for, such as filing fees or travel costs.
Once you have determined the scope of work and compensation, you can draft the agreement.
It is important to include all of the relevant information in the agreement, such as:
- The names and contact information of both parties;
- A description of the services to be provided;
- The fee arrangement;
- The duration of the agreement;
- Cancellation policy.
The agreement should be clear and concise, and it should spell out all of the terms that you have agreed upon. Be sure to have the client review and sign the agreement before beginning any work.
Finally, make sure that both you and the client sign the agreement and keep a copy for your records. Once it is signed, the agreement is legally binding and cannot be changed without both parties agreeing to do so.
Common Issues that Can Arise with Retainer Agreements
One common issue that can come up with retainer agreements is scope creep. This happens when the scope of work outlined in the agreement begins to change, but the fee remains the same. For example, if you are hired to design a website but then the client asks you to also write content for the site, that is scope creep. To avoid this issue, be sure to outline all of the deliverables in the agreement and have the client sign off on them. If additional work is requested, make sure that you discuss it with the client and agree on an additional fee before beginning any new work.
Another common issue is late payments. To avoid this, include language in your agreement that states when payments are due and what will happen if payments are late. You may want to consider charging a late fee or interest on late payments. Finally, make sure that you include a clause that states the agreement can be terminated by either party with X amount of notice. This will give you some protection if a client decides to stop working with you without any warning.
Sample Retainer Agreement Template
The sample retainer agreement below can be used as a template when drafting your own agreement. This agreement includes all of the essential components of a retainer agreement, including the scope of services, billing arrangement, and attorney-client privilege:
This Retainer Agreement Template is entered into on [DATE] by and between [LAW FIRM] and [CLIENT]. Description of Services: [LAW FIRM] will provide the following legal services to [CLIENT]: - [SERVICE ONE] - [SERVICE TWO] - [SERVICE THREE] Billing Arrangement: Fees for services will be billed at an hourly rate of [AMOUNT]. Retainer fees will be invoiced on a monthly basis, in advance, and are due within [NUMBER OF DAYS] days of receipt. If the retainer is depleted, additional funds will be required to continue work. All-time spent on behalf of the client will be tracked and billed accordingly. Additional charges may apply for out-of-pocket expenses incurred on behalf of the client, including but not limited to travel, court filing fees, and copy costs. Cancellation Policy: Either party may terminate this agreement at any time for any reason upon [NUMBER OF DAYS] days written notice. Upon termination, all documents and records pertaining to the client will be delivered to the client or his/her designee within [NUMBER OF DAYS]. The law firm will not be responsible for any work performed after receipt of notice of cancellation. All unpaid invoices will become immediately due and payable upon cancellation. This Retainer Agreement Template sets out the terms under which [LAW FIRM] will provide legal services to [CLIENT]. This agreement is made between [LAW FIRM], with a mailing address of [ADDRESS] (“Law Firm”) and [CLIENT], with a mailing address of [ADDRESS] (“Client”). The term of this agreement shall commence on the date of execution and shall continue in full force and effect until terminated as provided herein. The Law Firm may terminate this agreement at any time for any reason upon written notice to the Client. The Client may terminate this agreement at any time for any reason by ceasing to retain the services of the Law Firm. Upon termination, all documents and records pertaining to the client will be delivered to the client or his/her designee within thirty (30) days. The Law Firm agrees to provide the following services to the Client (the “Services”): [DESCRIBE THE SERVICES TO BE PROVIDED] The Client hereby retains the Law Firm and its attorneys to perform the Services on the terms and conditions set forth in this Agreement. The parties agree that the Law Firm’s provision of services to the Client shall be as an independent contractor and not as an employee of, or agent for, the Client. Nothing contained herein is intended to or shall create a partnership, joint venture or employer-employee relationship between the parties hereto. Each party acknowledges that it has read this agreement, understands it, and agrees to be bound by its terms and conditions. DEFINITIONS “Services” means the legal services to be provided by the Law Firm for the Client as described in Exhibit A attached hereto and incorporated herein by reference. “Law Firm” means the law firm of [insert name of law firm]. “Client” means [insert name of client]. This Agreement shall commence on the date of its execution and shall continue in full force and effect until terminated as provided herein. Either party may terminate this Agreement upon thirty (30) days written notice to the other party; provided, however, that neither party shall be obligated for any Services rendered prior to the effective date of termination. Upon expiration or termination of this Agreement, all rights and obligations of the parties shall cease, except that any provisions which by their nature are intended to survive expiration or termination of this Agreement shall so survive. This Agreement sets forth the entire understanding of the parties with respect to the subject matter hereof and supersedes all prior agreements, understandings, and representations, whether written or oral, with respect thereto. This Agreement may not be modified or amended except in writing and signed by both parties. The invalidity or unenforceability of any provision of this Agreement shall not affect the validity or enforceability of any other provision. IN WITNESS WHEREOF, the undersigned have executed this Retainer Agreement as of the date first above written. COMPANY: ______________________________ By: ____________________________________ Its: ___________________________________ CLIENT: _______________________________ By: ____________________________________ Its: ___________________________________