Control those legal fees

One of the most difficult areas in any relationship with a professional service provider concerns fees. Lawyers in particular suffer from the reputation for being expensive and clients, armed with popular prejudice from the media and tales of the substantial financial rewards available at the larger commercial firms begin the relationship on the assumption that over-charging is the name of the game. This is not and need not be so. There are a few simple rules which, if followed, should leave both you in control of costs and the lawyer content.

Agree at the beginning the exact scope of the work to be done: be clear what you are trying to achieve and what your expectations are and ask the lawyer to confirm that these are both understood and reasonable in the context of the transaction. Misunderstandings often arise because tasks which are necessary successfully to conclude a transaction are assumed by the lawyer to have been accepted but by the client as an unexpected extra when the bill is produced. It is the lawyer’s duty to help to avoid these misunderstandings at the outset.

Be clear about and agree the basis for the billing. A commercial lawyer should understand that the client needs to control its costs and be willing to take a constructive attitude on fees. In fact there is no mystery. You may be charged based on the total number hours worked – which may also be subject to a total fee cap – or you may agree a fixed fee for the transaction. In litigious matters it may be appropriate to agree a fixed basic fee with an additional success related element (subject to local regulatory constraints). The best approach to adopt will depend on the nature of the transaction. Where the amount of work required is reasonably predictable a fixed fee may be the best approach. Where the amount of work cannot be predicted with certainty – as in a complicated commercial transaction – hourly rates (albeit with fixed fee and capped elements) would be more normal, although even in this case it should be possible to avoid open ended commitments. However, although we do know our own job and how much our work should cost, we cannot always control the other side to the transactions which may have its own reasons for prolonging the negotiations and time and effort need to reach a successful conclusion.

It is important to have realistic expectations. If a fixed fee is agreed then nay subsequent changes to the scope of the assignment are likely to affect the assumptions on which the fixed fee was offered so you are not being ill treated if the lawyer asks to make an adjustment to the fee. Conversely, if offered a fixed fee carefully check the assumptions and what is included. It is a favourite tactic when being asked to provide fixed fee quotation to put in low bid to win the work so hedged with exceptions that the client ends up paying far more than it expected. More often than not this leads to firms that submit realistic bids which would have been cheaper for the client in the end being rejected in favour of apparent bargains which are anything but when the final bill is paid.

Be clear about what extras – typically third party costs and expenses – are likely to be incurred and how often bills will be delivered. Cash flow is very important and monthly billing with money for third party costs being paid in advance is likely to be the most convenient for both parties – after all we are lawyers not bankers.

Finally, and most importantly, communication. If something is not clear do ask. As lawyers it is in our interests to have happy clients – and that includes the bills – and we are keen to be constructive.

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