Engagement letter and costs agreement

A combined engagement letter and costs agreement (often called a fee agreement in the US), written in plain English. It covers scope and exclusions, who will do the work, rates and estimates, trust money, billing, ending the engagement and file retention.

Use it when you open a matter billed by time or on a fixed fee. It is written for private clients and small businesses. For large corporate clients with their own panel terms, you will usually work from their paper instead.

What is inside

• Engagement letter: who the client is, who will do the work, the scope and what is excluded.

• Costs agreement: hourly rates for each person, the billing increment and an estimate with the assumptions behind it, or a fixed fee and its variation triggers.

• Billing, trust and payment terms: how often you will bill, when payment is due, how money held in trust may be applied to invoices and what happens if a bill is unpaid.

• Ending the engagement: how either side can end it, what the client pays for work done and what happens to the file.

• File retention: how long the file will be kept, in what form, and what happens when the period ends.

• Drafting notes: a short note on each clause explaining what it is for and when to change or remove it.

The template has 76 bracketed fields, from the client’s name to the assumptions behind the estimate. When you generate the letter from a matter in Filebird, most of them fill in from the matter.

Each clause stands on its own, so you can remove one without renumbering or rewriting the rest. The drafting notes are in a separate column that does not print, so the client never sees them.

Writing the scope

The scope clause does more to prevent disputes than any other part of the letter. Describe the work in plain terms, then list what is not included. If the client asks for something outside the scope later, you have a clear basis for a variation and a fresh estimate.

• Name the transaction, dispute or task, with the property, party or court where relevant.

• Say where the work ends, such as at settlement, at judgment or on delivery of advice.

• List the obvious exclusions, such as related disputes, tax advice, finance or appeals.

Write in the second person and in plain English. The letter is for the client, not for a court, and short sentences under clear headings are easier to read and harder to misunderstand.

Estimates that hold

An estimate is only useful if the client understands what it assumes. State the assumptions plainly, such as the number of rounds of negotiation or whether the matter goes to a hearing, and say what happens if they change. Update the estimate in writing as soon as it is likely to be exceeded, before the work is done.

Give a range rather than a single figure when the matter genuinely could go either way, and say what would put it at the top of the range. Clients remember the low number, so make the reasons for the high one easy to find.

Sending and signing

Send the letter on the day the matter opens, ideally through the client portal so the signed copy lands on the matter. Explain the key terms on a call first, especially the estimate and how trust money will be used. A client who has heard it from you is far more likely to read it.

Follow up if it has not come back within three business days. A short, friendly call usually finds the reason, which is often a question the client was unsure how to ask. Do not start substantive work until the signed copy is on the matter, unless your rules and the circumstances allow it.

Using it in Filebird

Save your approved version as a precedent in Filebird and link it to each practice-area matter template. When a matter opens, the letter can be generated from the matter in a few clicks, with the client, scope, rates and estimate filled in. Check every bracketed field that remains, then send it through the client portal so the signed copy returns to the matter.

Keep one approved version per type of work rather than editing the letter matter by matter. Changes to the standard terms should go through the principal who approved it, and the old version should be retired so nobody uses it by mistake.

When a matter’s scope changes, generate a variation letter from the same precedent rather than writing one from scratch. It keeps the language consistent and records the change on the matter.

Before you use it

• Replace every bracketed field and delete the clauses that do not apply.

• Insert the costs disclosure your jurisdiction requires, including any thresholds that change its form.

• Set out your billing increment, usually six-minute units, and your payment terms.

• Have a principal approve the final version before it becomes your standard.

Variable fields sit in square brackets, so you can find every one before the letter goes out. The drafting notes explain what each clause is for and when to remove it.

I sign off every policy we publish, and I would say the same about this document as any precedent: it is a starting point. Costs disclosure and engagement rules vary between jurisdictions and change over time. Check it against your law society or state bar’s current rules before it reaches a client.