Seven questions to ask before you sign an engagement letter

The engagement letter is the contract between you and an attorney, and it is the document every later disagreement about money gets measured against. It is also, in my experience of hiring attorneys for a small business, the point at which most people stop reading because the hard part appears to be over.

Seven questions. Ask them before signing, and get the answers written into the letter rather than left in a conversation.

1. What exactly is the scope, and what is outside it?

Scope is the single biggest source of billing disputes. A letter that says the attorney will represent you "in connection with" a matter is broad enough to mean almost anything, which cuts both ways when the bill arrives.

Ask for the scope stated as tasks and stages. Draft and send a demand letter. Negotiate a resolution. File a complaint if negotiation fails. Then ask what falls outside: an appeal, a counterclaim, a related matter, enforcing a judgment once you have won it. That last one catches people out regularly, because winning and collecting are separate pieces of work.

2. What is the rate, who else will work on this, and at what rate?

The attorney you meet is often not the only person who will bill on your matter. Associates and paralegals bill at lower rates and doing appropriate work at a lower rate is good for you, not bad.

What you want is the list: who may work on this, at what rate each, and who decides how work is allocated. Then ask about the billing increment. A firm that bills in tenths of an hour and one that bills in quarter hours produce noticeably different totals from the same work, because a two minute email is rounded very differently.

3. Which costs are separate from fees, and are they marked up?

Fees pay for time. Costs are the money spent on your behalf, and they are billed separately: filing fees, service of process, court reporters, expert witnesses, records requests, travel, sometimes copying and postage.

On a litigated matter costs are not a rounding error. Ask which categories to expect, whether any are marked up above what the firm actually pays, and whether you will be asked to fund them in advance or billed after. Ask specifically about experts, because on a technical dispute a single expert can approach the size of the legal fee.

4. What is the retainer, and what happens to what is left?

A retainer paid up front is normally held in a client trust account and drawn against as work is done. Ask three things: how much, whether the unused balance is refundable if the matter ends early, and whether you will be asked to top it up, at what trigger.

Then ask how often you will see a statement showing what has been drawn and for what. Monthly is standard and worth insisting on. A statement that arrives only when the retainer is exhausted removes your ability to steer.

5. What is your estimate to the next decision point, not to the end?

Asking what the whole matter will cost usually produces a range so wide it tells you nothing, because the answer genuinely depends on what the other side does.

A better question is what it costs to reach the next decision point, and what that decision will be. To the response to a demand letter. To the close of the pleadings. To a mediation. That produces a number a good attorney can actually give, and it lets you re-evaluate at each stage rather than committing blind to the whole thing.

6. How will we communicate, and is it billed?

Ask who your point of contact is, what the expected response time is, and whether phone calls and emails are billed. They generally are, which is fine, but it changes how you use them: batching four questions into one email costs less than four emails, and knowing that in advance saves money without costing you anything.

Ask also what you will be copied on and what you will not. Being sent every document generated in a litigated matter is expensive to produce and rarely useful. Agree what you actually need to see.

7. How does this end, on either side?

Every engagement letter has termination provisions and almost nobody reads them. You should know how to end the relationship, what you owe if you do, and how you get your file. The file is generally yours, but the mechanics of getting it and any charge for producing it are worth knowing before you need it.

Ask the same in reverse. An attorney can withdraw in defined circumstances, and knowing what those are is useful, particularly the one about non payment.

What to do with the answers

Get them in the letter. An attorney who has told you something clearly will almost always agree to write it in, and the request is normal rather than adversarial. If any answer is different in the letter from what was said in the room, ask about it before signing, because the letter is what governs.

Take the letter home and read it once more the following morning. Nothing about a legal matter improves so quickly that a night is unaffordable, and the questions that occur to you overnight are usually the good ones.