Fee Agreements: Types, Provisions, Ethical Boundaries, and Other Considerations-part I

• Publication year: 2002
• Pages: 35
• Citation: Vol. 31 No. 2 Pg. 35

31 Colo.Law. 35 Colorado Lawyer 2002.

2002, March, Pg. 35. Fee Agreements: Types, Provisions, Ethical Boundaries, and Other Considerations-Part I

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35

Vol. 31, No. 2, Pg. 35

The Colorado Lawyer
March 2002
Vol. 31, No. 3 [Page 35]

Departments
Law Practice Management
Fee Agreements: Types, Provisions, Ethical Boundaries, and Other Considerations - Part I
by G. Michael Schuyler

A written fee agreement is the attorney's best opportunity to provide a clear and accurate understanding of the services to be performed and the fees and costs to be charged, consistent with the client's wishes. A well-drafted fee agreement can ensure that the attorney and client have reached a meeting of the minds on the significant aspects of the representation and, therefore, can greatly reduce the likelihood of future disagreements and disputes

This article addresses the use of fee agreements by attorneys practicing in Colorado. Part I provides a general overview of the applicable case law and rules of construction and briefly explores some of the various types of fee agreements. Part II will offer practical examples of provisions for Colorado lawyers to consider including in, or excluding from, their fee agreements. Both Parts I and II address ethical considerations that affect fee agreements in Colorado

Fee Agreement Background
And Construction

An attorney and client may enter into a contract that sets forth the services to be provided and the fee to be charged The contract may address other aspects of the attorney/client relationship. As a general rule, such a contract will be treated and construed just as any other contract.1 Thus, the Colorado courts have been consistent in construing fee agreements liberally in the client's favor and against the drafting attorney.2 A fee agreement that is unconscionable or overreaching will be subject to general rules of contract law.3

Significantly, however, although fee agreements are essentially contractual, they are subject to overriding ethical rules and obligations.4 Unlike other contracting parties, the attorney and client are not completely free to negotiate the terms of their agreement, as recent changes and developments in the ethical rules governing attorneys have given clients greater input and control.5 Thus, the attorney has an ethical obligation to present a fee agreement that is fair and openly made and must provide the client with full knowledge of the facts and of the client's legal rights.6 In Colorado, fee agreements are subject to close examination for the reasonableness of their terms under the courts' supervisory power over attorneys as officers of the court.7 In a lawsuit to recover attorney fees, the attorney not only must show that the fee agreement was fair and openly made with the client having full knowledge of facts and legal rights, but also must demonstrate that the services "were reasonably worth the amount stated in the agreement."8

In connection with all fee agreements, Colorado attorneys need to be aware of the Colorado Supreme Court's revisions to Colorado Rule of Professional Conduct ("Colo.RPC") 1.5(b), which took effect on July 1, 2000. Colo.RPC 1.5(b) now requires that the attorney's basis or rate of fees be communicated, in writing, to a client prior to the representation or within a reasonable time, unless the attorney has regularly represented the client.9 The Comment to Colo.RPC 1.5(b) indicates that the writing need not take the form of a formal fee agreement or be signed by the client.10 However, note that contingent fee agreements must be in writing and must be signed by the client, regardless of whether the attorney has a new or established relationship with the client.11 Other fee agreements may or may not have to be in writing.

Regardless of the type of fee arrangement, the ethical rules require the fee to be reasonable.12 As part of the new written requirement under Colo.RPC 1.5(b) requiring the disclosure of the basis or rate of fee, the attorney should recite the factors that directly affect the fee computation to assist the client's understanding.13 If a development occurs during the course of the representation that would alter the initial disclosure of the basis or rate of fee, a revised written disclosure should be provided to the client.14

Types of Fee Agreements

There are many types of fee agreements. As the name implies the agreement is usually defined by the type of fee to be charged or the approach to billing the client. Fee agreements may be time-based or contingency. They may provide for fixed or flat fees, or for an amalgam of several fee arrangements or billing practices. There is no such thing as the "one-size-fits-all" fee agreement that is suitable for all representations. Moreover, as noted above, there is no requirement that all types of fee agreements be in writing. As Colorado attorneys move into...