MARKETING MANAGEMENT TECHNOLOGY FINANCE
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By Marian C. Rice
Engagement Letters: Beginning a
Beautiful Relationship
T HE ABA STANDING COMMITTEE on Lawyers’ Professional Liability recently released data on a cross- section of legal malpractice claims from 2008 to 2011,
reporting that nearly 16 percent of all claims had been caused by
poor client communications. To avoid such an outcome, lawyers
should start their relationship with a client by having a full and
frank discussion about the goals and terms of the engagement and
the responsibilities of both the attorney and the client. Shortly after,
the oral agreement needs to be accurately committed to paper.
Many jurisdictions mandate the content of written engagement
letters in certain situations, and lawyers must consult the local
rules before settling on the form of engagement letter to use as
a guide. The ABA Model Rules of Professional Conduct “prefer”
written engagement letters and require written agreements only
where a contingency fee is permitted (Rule 1. 5(c)) or where the
fee charged may be considered entering into a business transaction
with a client (Rule 1. 8(a)). The Comments accompanying Rule 1. 5
state that in order to avoid possible misunderstandings, it is “desir-
able” for an attorney to provide the client with a memorandum or
statement containing “the general nature of the legal services to be
provided, the basis, rate or total amount of the fee and whether and
to what extent the client will be responsible for any costs, expenses
or disbursements in the course of the representation.”
Even where a jurisdiction does not mandate the use of a written
engagement letter, however, maintenance of office procedures
requiring that all engagements be reduced to writing is a sound risk
management policy and promotes compliance with the Model Rules.
Think of the engagement letter as a road map to the representation
you and the client are considering. The structure of the engagement
letter should include what the attorney needs to know to effectively
represent the client and to get paid for the services rendered.
IDENTIFY THE CLIENT
As an initial matter, the engagement letter should identify the
client whose interests are being represented. Equally as important
is a definition of those whose interests are not being represented
by the attorney. In representing a business organization, particular
care should be taken to explain to the constituents of the organiza-
tion that the organization is the attorney’s client where the inter-
ests of the organization may not be aligned with those of the con-
stituents, as noted in Model Rule 1. 13(f). Engagement letters in
the trust and estates field should also clearly identify the attorney’s
client in order to avoid the common misconception by relatives of
the client that the attorney is the “family” lawyer.
SCOPE OF ENGAGEMENT
Making the scope of the work performed under the terms of an
engagement letter as broad as possible is a natural reaction. This is
often based upon the misguided theory that a broad engagement
letter will generate additional legal work. In fact, an engagement
letter with a loosely defined scope of the work covered does little
more than expose an attorney to potential liability well outside
the range of services he or she intended to perform. As outlined
in Model Rule 1. 2(c), it is perfectly acceptable for a lawyer to reasonably limit the terms of the engagement, provided the client is
aware of the limitations and gives his or her informed consent.
A plainly worded provision setting forth the defined scope of
the services to be performed is one of the most important risk
management tools an attorney can adopt. If the intended engagement does not include appeals, the engagement letter should say
so. If the attorney represents the executor but an accounting professional is separately retained by the estate to prepare the estate
tax returns, spell it out in the engagement letter. If the ongoing
representation expands beyond its original scope, a simple amendment to the original agreement will suffice. It is a sensible idea to
set forth in this section of the engagement letter the allocation of
responsibility between the attorney and client in order to apprise
the client of his or her role in the success of the representation.
TERMS OF PAYMENT
The engagement letter must also set forth the monetary terms
of payment and should include the frequency of payment, the
definition of the expenses for which the client will be responsible and a realistic outline of the steps involved in the course of
