With another year upon us, it’s a good time to reflect on areas you can improve when it comes to your current firm practices, specifically the engagement letter best practies.

As the contract between you and your client, a written engagement letter is essential. Each new client matter or representation, big or small, should begin with an engagement letter that is signed by all parties.

How Engagement Letters Protect You

A carefully worded engagement letter is one of the best tools you can have for reducing your risk of having a complaint or malpractice claim made against you. A letter not only establishes how you will be paid, but memorializes the scope of the representation, the basis or rate of your fee and the expenses that will be the responsibility of the client.

Engagement letters can be used as binding contracts in the event of fee disputes, collection issues and more—giving peace of mind to both parties. Your client will know exactly what to expect from you, as well as what is expected of them. This can help prevent misunderstandings and strengthen the relationship down the road.

In the rare event of a dispute between you and your client, the legally binding engagement letter can serve as the go-to document for resolution. A proper engagement letter is critical in helping to provide a strong defense against a complaint or malpractice claim.

How Letters Fit into Your Intake Process 

Having a strong intake process is key to getting the information you need to craft a solid engagement letter for all your clients and case matters. It can also help you avoid potential headaches later by making sure the client and case are a good fit for your firm.

Take advantages of client screening resources from your state bar association, which can help you craft an intake form with all the necessary questions, including goals for the representation, practical expectations, prior representations on the matter and ability to pay.

Once you have all the information you need, you can draft a suitable engagement letter. Be sure not to include anything in your letter that could be construed as a promise of a particular outcome, which can never be guaranteed.

The engagement letter should be the end result of your intake procedures and contain no surprises for the new client. If a potential client seems unwilling to sign a copy of the engagement letter after thoroughly consulting you on the representation, this may be a sign of future difficulties.

What Provisions to Include in Engagement Letters

While there is no one-size-fits-all format for engagement letters, there are several provisions that should always be included. These sections help protect you and give confidence and clarity to the client about their representation.

Your engagement letters should include the following:

• Statement of purpose: Begin each engagement letter by offering a brief overview of the purpose for the letter. This sort section should explain why the client is receiving the letter and the matters that are involved.
• Scope of representation: Give a clear description of exactly what legal services you and your firm will perform for the client specifically for this new matter. Also be sure to identify those tasks that are outside the scope of the engagement.
• Identification of the client: Use the engagement letter to clearly identify who is and is not the client for which you will perform legal work. Specify when the client will be a company but not its affiliates, a partnership but not the individual partners, or only certain persons but not others involved in family law matters. If there are multiple clients involved, use the letter to confirm consent to joint representation, address any potential adversity between the parties, and note the necessary sharing of confidential information among parties.
• Responsibilities of the client: Touch on all responsibilities of the client during representation, from participation in and assistance with a defense to timely payment of fees.
• Fee and billing arrangements: Explain how the firm’s fee will be calculated, the categories for expenses that are the responsibility of the client and any provisions for staged payments, retainers, security deposits or advances. Spell out that the total fee of legal services cannot be predicted and that a retainer payment is not an estimate of the total fee.
• File policy: Include a description of the lawyer or firm’s file retention and destruction policy regarding privileged information the client may share with you and the firm.

The engagement letter should be signed by all parties of the engagement as soon as possible and definitely before the end of your representation. Always review and update your engagement letter for each new client and matter of representation. If a representation beyond the scope outlined in the engagement letter becomes necessary and desired, provide the client with a new engagement letter that covers the next stage of representation.

Engagement letters are an important part of each case matter and representation, helping to answer questions, set expectations, outline obligations and generally make for a smoother attorney–client relationship. A well-drafted letter can also give you and your firm peace of mind in the event a representation leads to a complaint or claim.

While following best practices for engagement letters can reduce your exposure to risk, some legal risk will always remain. Malpractice claims can happen to anyone, even when no error has been made. To protect yourself, it’s important to make sure you have the right insurance coverage.

With Professional Liability Insurance from Lockton Affinity and CNA, you have coverage that is specifically designed for Colorado Bar Association members, so that you can pursue your professional practice with coverage that’s right for you and your firm.