8.2 Retainer Agreements
What is a Retainer?
Retainers have several definitions, including:
- The act, by a client, of engaging a lawyer to provide professional services.
- The document that sets out the terms of engagement between the lawyer and the client for professional services (i.e., a "retainer letter" or "retainer agreement").
- An amount of money paid by the client to the lawyer in order to secure the lawyer's professional services (i.e., a "money retainer").
This Module will focus on the second and third definitions.
While the Code of Conduct does not require that lawyers always have retainer letters in place, using retainer letters is a best practice in almost all retainer arrangements.
Although it is possible to have a General Retainer, they are extremely rare, and you should be cautious about relying on one.
A General Retainer is a sum of money paid to the lawyer by a client, but not for the purpose of performing specific work.
Rule 119.41(1) of the Rules of the Law Society of Alberta permits a General Retainer to be paid into a lawyer's general account, not a trust account, provided that the client signs a general retainer agreement acknowledging that
- The money is non-refundable and belongs to the firm on receipt.
- The law firm is not obliged either to account for the money or render services with respect to the money. And
- Services may never be rendered in respect of the money.
The law firm is required to retain the client’s written acknowledgment.
As you can see, this is an unusual arrangement that does not reflect the way that lawyers generally deliver legal services and are paid.
Caution: a General Retainer is rife with potential for misunderstandings. (When is the lawyer allowed to draw upon the General Retainer? How much? What work is to be done? How long does it last?) You have the onus of proving that a retainer is a bona fide General Retainer.
If you are considering a General Retainer, you may want to consult with the Practice Advisors to ensure that it is in fact appropriate and that you have adequately addressed the client acknowledgment.
Retainer Letters or Agreements
In general, a Retainer Letter or Retainer Agreement confirms the terms of engagement of your professional services. It sets out the scope of services to be performed, billing matters and your authority to act.
The Rules of Court, Rules 10.5 and 10.6, govern lawyers’ Retainer Agreements. Provisions in a Retainer Agreement that purport to relieve a lawyer of liability or which purport to require the lawyer’s consent to settlement or discontinuance are void.
Lawyers should review the topics covered in the Retainer Letter or Retainer Agreement early in the relationship, preferably at the first meeting. If you decide to accept the client's case, you should send the client both a letter detailing what was discussed at the initial meeting and a separate Retainer Letter setting out the essential terms of the relationship. The Retainer Letter will govern your relationship with the client for the lifetime of the matter. Your preliminary advice, based on your initial understanding of the matter, does not need to be in this document.
You should instruct the client to read the Retainer Letter or Retainer Agreement before signing it, and in some situations, such as a contingency fee arrangement, you should inform the client that he or she has the right to have it reviewed by another lawyer.
If you decide not to accept the matter, you should send a Non-retainer or Non-engagement Letter.
What Purpose Do Retainer Letters Serve?
In most cases, your client will give you a specific retainer for the purpose of performing a specific task. A specific retainer serves a number of valuable purposes:
- A Retainer Letter turns the client's mind to the issue of fees and, specifically, that the services you perform are professional services that require payment. It is essential to discuss fees with clients. You should issue timely and sufficiently detailed bills in order to manage the relationship and manage your client's expectations, get paid and reduce the chance of client complaints.
- It gives you some assurance that at least some payment will be received for the services you perform.
- It sets out what services you will and will not perform.
- It confirms your authority to act on the client's behalf.
- It outlines how your services are to be billed, including frequency of billing, disbursements, tax issues, etc.
- It confirms crucial information that you discussed with the client at the first meeting.
- It lets the potential client know that you are not representing him or her until the retainer letter or agreement is executed and returned to you.
- It provides a mechanism for replenishing a money retainer and alerts the client to the methods by which the lawyer-client relationship may or will be terminated.
- If there is a dispute about matters such as the scope of your services, a Retainer Letter or Retainer Agreement provides valuable evidence about the intended terms of your relationship. It is important to remember that in the absence of a written agreement, uncertainty as to the scope of the retainer will be construed in the client's favour.
- It clarifies who the client is, which can be different from who is paying your fees.
The importance of having a signed Retainer Letter or Retainer Agreement cannot be overstated. A fulsome and explicit Retainer Letter or Retainer Agreement is the first document a Review Officer asks for in the case of a fee dispute. A Retainer Agreement protects both the client and the lawyer in the case of a dispute or litigation. If there is a dispute about what a lawyer was hired to do, in the absence of a Retainer Agreement, a court is more likely to find in favour of the client’s version.
When acting for more than one side to transaction (which should be a rare practice), make sure all parties sign both a Retainer Letter or Retainer Agreement and a written conflict of interest letter which should be kept on the file.