What the engagement letter says about your bill, clause by clause

The engagement letter is the contract between a client and an attorney. It defines the work, the fee, and what happens when either changes. It is usually two to five pages and it is signed at a moment when the client is thinking about their problem rather than about the document.

Read it as a document. Here is what each part is doing.

Scope of representation

The first substantive clause, and the one that determines everything else. It names what the attorney is being engaged to do and, importantly, what is excluded.

What to look for: whether the scope is a matter or a phase. A letter engaging counsel to represent you in a dispute is broader than one engaging counsel to review a contract and advise. A phased scope is common and sensible, and it means a new letter or an amendment when the matter moves to the next stage.

Exclusions are usually explicit. Appeals, related tax advice, and enforcement of a judgment are commonly carved out. That is not a trick; each is a distinct body of work. It does mean the fee estimate covers less than the client assumes.

The fee basis

Four structures, and the letter names one or a combination.

• Hourly. A rate per timekeeper. The letter should list each person who may work on the matter and their rate, and should say whether rates change annually.
• Flat fee. A fixed amount for defined work. The value is predictability. The thing to check is exactly what triggers a return to hourly billing, because that clause is always present.
• Contingency. A percentage of the recovery. The clause to read carefully states whether the percentage is calculated before or after costs are deducted, because the two produce meaningfully different results.
• Retainer. Which means two different things. An advance deposit held against future fees, or a periodic payment securing availability. The letter will say which, and whether any part is refundable.

The billing increment

A short clause with a large effect. Hourly work is recorded in minimum increments, commonly a tenth or a quarter of an hour, and every discrete task is billed at least that minimum.

The practical consequence: three separate two-minute phone calls cost more than one six-minute call. Clients who batch their questions into a single scheduled call rather than sending them as they arise reduce their own bill without giving anything up.

Costs and disbursements

Distinct from fees, and additional to them. The letter lists the categories: court filing fees, service of process, deposition transcripts, expert witnesses, records retrieval, travel, courier, and sometimes copying.

Two questions worth asking out loud. Is there a threshold above which the firm will seek approval before incurring a cost? And are costs advanced by the firm and billed on, or paid directly by the client? Expert fees in particular can exceed the legal fees in a technical matter, and they are the line most likely to be underestimated at the start.

Billing frequency and payment terms

Look for how often invoices issue, what detail they contain, how long you have to raise a question about an entry, and what happens on late payment. Interest on overdue balances is common.

The clause worth noticing is the one permitting withdrawal for non-payment. It is standard and enforceable subject to court approval where litigation is underway, and it is the reason to raise a payment difficulty early rather than by falling silent.

Trust accounts and how a deposit is handled

Where an advance deposit is taken, it goes into a client trust account and is drawn down as fees are earned and billed. The letter says so, and it says what happens to any unearned balance at the end.

Ask whether you will receive a statement showing the balance. Reputable practice is that you will.

Termination

Both sides can end the relationship. The client's right is broad. The attorney's is constrained, particularly once proceedings are underway.

The provisions to note: what is owed on termination, what happens to the file, and whether the firm asserts any claim over documents or recovered funds until fees are paid. The file question is practical and worth resolving before you need it.

What to ask before signing

1. What is your estimate to the next milestone, and what would change it?
2. Who will actually perform the work, and at what rate?
3. What is the billing increment, and are brief calls billed?
4. Which costs do you expect on a matter like this, and what are the largest?
5. What is outside the scope in this letter?

All five answers should already be in the document. Asking them out loud tells you whether the document matches the conversation, which is the only thing worth knowing before a signature.