Legal Engagement Letters

An engagement letter is the contract that comprehensively defines and governs the attorney-client relationship. The letter serves the critical function of allowing the lawyer and client to formally memorialize the scope, terms, and mutual understandings regarding all aspects of the legal engagement from the outset.

A key component is precisely identifying who the client is that is being represented. For an individual, the letter should explicitly state that the representation does not extend to any business entities or affiliates, unless specified. If the client is an organization, the letter should indicate the client is the entity itself, not its individual owners, employees or subsidiaries. This delineates who is and isn’t the client for conflicts purposes.

The engagement letter must also strictly define the specific scope and subject matter of the representation. The scope can be limited to certain areas or matters if desired, excluding other affairs that may pose conflicts. Detailing the precise scope manages expectations and allows avoiding matters falling outside the contracted scope.

Describing the fee structure, rates, and payment terms is essential. The letter lays out how charges will be calculated, whether hourly, contingent, flat or otherwise. It should estimate fee ranges and require client notification and consent for any changes. The letter governs splitting fees with other firms and having third parties pay, which generally requires approval.

Many attorneys also require an upfront retainer payment from the client. A retainer is an advance fee deposit that is held by the attorney and drawn on as legal services are rendered and billed. The retainer helps ensure the attorney’s fees will be covered and provides income stream stability for the firm. The engagement letter specifies the required retainer amount, usually based on an estimate of anticipated fees for the initial stage of representation. It also outlines policies for replenishing the retainer if it gets depleted below a minimum threshold.

Beyond these basics, the letter sometimes contains provisions aimed at facilitating the representation while protecting attorney and client interests. A prospective “advance” conflicts waiver allows taking on certain future conflicted representations, subject to limitations. The letter may also appoint a primary client contact for receiving communications and instructions.

Provisions can specify what constitutes the conclusion of the representation, such as accomplishing objectives or sending a closure letter. File retention and destruction policies are commonly outlined. The letter can mandate arbitration for any disputes between attorney and client rather than court litigation. It may also include jury trial waivers. 

For attorneys, the letter confirms client consent to scope restrictions, permits future conflicts through waivers, establishes fee terms, designates file protocols, requires ADR for disputes, and more. For clients, the principal role is preventing misunderstandings and fostering transparency on identification of the client, retained objectives, fees, rights waived and duties of both parties.

The engagement letter should be drafted and executed prior to the attorney beginning substantive work. Once finalized and acknowledged, the letter is a binding contract dictating the rules and boundaries of that specific attorney-client relationship. Both parties must carefully review and ensure they understand all provisions before agreement. Taking the time to comprehensively address pertinent issues fosters aligned expectations and lays the contractual framework for an efficient, ethical partnership.