Termination, contracts, and fees - Client-lawyer contracts

Learning Outcomes

After reading this article, you will be able to identify when and how a client-lawyer relationship may be terminated, explain the requirements for fee agreements and modifications, and apply the Model Rules to issues involving client-lawyer contracts. You will also be able to answer MPRE-style questions on contract formation, termination, and fee disputes.

MPRE Syllabus

For the MPRE, you are required to understand the rules governing the formation, scope, modification, and termination of client-lawyer contracts, as well as the requirements for fee arrangements and the consequences of improper agreements. This article covers:

• The creation and scope of the client-lawyer relationship and contract.
• Mandatory and permissive withdrawal from representation.
• Duties upon termination, including return of property and fees.
• Requirements for fee agreements, including reasonableness, writing, and modifications.
• Prohibited fee arrangements and limitations on malpractice liability.
• Handling of fee disputes and retention of client funds during disputes.

Test Your Knowledge

Attempt these questions before reading this article. If you find some difficult or cannot remember the answers, remember to look more closely at that area during your revision.

1. Which of the following is required for a lawyer to prospectively limit malpractice liability in a client-lawyer contract?
   1. The agreement must be in writing and signed by the client.
   2. The client must be independently represented in making the agreement.
   3. The lawyer must advise the client to seek independent counsel, but the client need not do so.
   4. The agreement must be approved by a court.
2. When may a lawyer withdraw from representing a client even if withdrawal may harm the client’s interests?
   1. Only if the client consents in writing.
   2. If the client fails to pay fees after reasonable warning.
   3. If the lawyer finds the client’s actions repugnant or fundamentally disagrees with them.
   4. Both b) and c).
3. Which of the following is NOT a requirement for a valid contingent fee agreement?
   1. It must be in writing.
   2. It must be signed by the client.
   3. It may be used in a criminal defense matter.
   4. It must state the method by which the fee is calculated.
4. Upon termination of representation, what must a lawyer do with client property and unearned fees?
   1. Retain all property until the client pays outstanding fees.
   2. Promptly return all property and unearned fees to the client.
   3. Transfer property to a third party at the client’s request.
   4. Only return property if the client requests it in writing.

Introduction

A client-lawyer contract sets the terms of the professional relationship, including the scope of representation, fees, and the circumstances under which the relationship may end. The Model Rules of Professional Conduct impose specific requirements on these contracts to protect clients and ensure ethical practice. Understanding how these contracts are formed, modified, and terminated is essential for MPRE success.

Key Term: Client-Lawyer Contract
An agreement between a lawyer and client establishing the scope, terms, and conditions of legal representation, including fees and duties.

Formation and Scope of the Client-Lawyer Contract

A client-lawyer relationship is typically formed when a person seeks legal advice or assistance and the lawyer agrees to provide it. No written contract is required for the relationship to exist, but written agreements are strongly recommended, especially for fee arrangements.

The contract should clearly define the scope of representation, the objectives, and the means by which those objectives will be pursued. The lawyer must communicate the basis or rate of the fee and any expenses for which the client will be responsible, preferably in writing and before or within a reasonable time after commencing representation.

Key Term: Scope of Representation
The agreed objectives and limits of the lawyer’s services for the client, as set out in the client-lawyer contract or as otherwise communicated.

Termination of the Client-Lawyer Relationship

The client-lawyer relationship may end in several ways:

1. Mandatory Withdrawal

A lawyer must withdraw from representation if:

• Continuing would result in a violation of the law or ethics rules.
• The lawyer’s physical or mental condition materially impairs the ability to represent the client.
• The client discharges the lawyer.

2. Permissive Withdrawal

A lawyer may withdraw, even if withdrawal may harm the client, if:

• The client persists in criminal or fraudulent conduct involving the lawyer’s services.
• The client has used the lawyer’s services to perpetrate a crime or fraud.
• The client fails to fulfill an obligation (such as paying fees) after reasonable warning.
• The representation will result in unreasonable financial burden on the lawyer.
• The client makes representation unreasonably difficult.
• Other good cause exists.

Key Term: Withdrawal
The process by which a lawyer ends representation of a client, either mandatorily or permissively, subject to court approval if required.

3. Duties Upon Termination

Upon termination, the lawyer must:

• Take reasonable steps to protect the client’s interests (e.g., give notice, allow time for new counsel).
• Surrender papers and property to which the client is entitled.
• Refund any unearned fees or advance payments.

A lawyer may retain papers relating to the client only to the extent permitted by law.

Fee Agreements and Modifications

Fee agreements must be reasonable and communicated to the client. While most fee arrangements do not require a writing, contingent fee agreements must be in writing, signed by the client, and must state the method of calculation, including expenses.

Key Term: Contingent Fee Agreement
A fee arrangement where the lawyer’s payment depends on the outcome of the case, subject to strict requirements and prohibitions.

Fee agreements may be modified during representation, but any modification must be reasonable at the time it is made and communicated to the client. If the modification is proposed by the lawyer, the client must accept it for it to be effective.

Key Term: Fee Dispute
A disagreement between lawyer and client over the amount or propriety of legal fees, often requiring retention of disputed funds in trust until resolved.

Prohibited Fee Arrangements and Limitations

Certain fee arrangements are not permitted:

• Contingent fees in criminal or most domestic relations matters.
• Unreasonable or excessive fees.
• Agreements that prospectively limit the lawyer’s liability for malpractice, unless the client is independently represented in making the agreement.
• Agreements that restrict the lawyer’s right to practice after termination, except as part of retirement benefits or the sale of a law practice.

Key Term: Limiting Malpractice Liability
An attempt by a lawyer to contractually reduce or eliminate liability for professional negligence, only allowed if the client is independently represented.

Handling Fee Disputes

If a fee dispute arises, the lawyer must:

• Retain only the disputed portion of funds in a trust account.
• Promptly distribute any undisputed funds to the client.
• Consider arbitration or mediation if required or recommended by local rules.

Worked Example 1.1

A client hires a lawyer for a personal injury case. The lawyer proposes a contingent fee of 33%, but does not provide a written agreement. The client wins a settlement, and the lawyer claims the fee. Is the lawyer subject to discipline?

Answer:
Yes. Contingent fee agreements must be in writing and signed by the client. Failure to comply with this requirement is a violation of the Model Rules.

Worked Example 1.2

A lawyer wishes to withdraw because the client refuses to pay agreed fees, despite repeated warnings. The client objects, and the case is in active litigation. What must the lawyer do?

Answer:
The lawyer may seek to withdraw, but must obtain court approval if required. The lawyer must continue representation if the court orders it, even if fees remain unpaid.

Worked Example 1.3

A lawyer includes a clause in the retainer agreement stating that the client waives all future malpractice claims. The client is not represented by another lawyer. Is this provision enforceable?

Answer:
No. Prospective limitation of malpractice liability is only permitted if the client is independently represented in making the agreement.

Exam Warning

Be careful: A lawyer cannot enforce a non-compete clause restricting another lawyer’s right to practice after leaving a firm, except as part of retirement benefits or the sale of a practice. Such restrictions are generally void and subject to discipline.

Revision Tip

Always check whether a fee agreement or modification is reasonable and properly communicated to the client. For contingent fees, confirm that all writing and content requirements are met.

Summary

Client-lawyer contracts must comply with the Model Rules regarding formation, scope, fees, modification, and termination. Withdrawal is strictly regulated, and duties to the client continue through and after termination. Fee agreements must be reasonable, and certain arrangements are prohibited. Disputes over fees require careful handling of client funds and may require alternative dispute resolution.

Key Point Checklist

This article has covered the following key knowledge points:

• Client-lawyer contracts define the scope, fees, and duties of representation.
• The relationship may be terminated mandatorily or permissively, with court approval if required.
• Upon termination, lawyers must protect client interests and return property and unearned fees.
• Fee agreements must be reasonable; contingent fees require a written, signed agreement.
• Certain fee arrangements are prohibited, including contingent fees in criminal and most family law cases.
• Prospective limitation of malpractice liability is only allowed if the client is independently represented.
• Fee disputes require retention of disputed funds in trust and prompt distribution of undisputed funds.

Key Terms and Concepts

• Client-Lawyer Contract
• Scope of Representation
• Withdrawal
• Contingent Fee Agreement
• Fee Dispute
• Limiting Malpractice Liability