Many times you can anticipate related services that you don’t intend to provide under the existing fee agreement with the client, but that the client might want provided. Like when you’re retained to negotiate a dispute, but not to litigate it. Or a settlement may have tax consequences for the client, but you won’t be giving tax advice. Be fair to the client and protect yourself by stating any excluded services in your fee agreement.
Consider including a provision like this in your fee agreement:
Legal services that are excluded under this agreement specifically include, but are not limited to, the following: _ _ _ _ _ _ _.
If Client wishes Attorney to provide any legal services excluded under this agreement, a separate written agreement between Attorney and Client will be required.
Keep in mind that a provision expressly limiting the scope of your services won’t necessarily absolve you of the responsibility to advise your client of matters beyond the scope of the services you’re providing (e.g., other possible remedies and applicable statutes of limitations) that may result in adverse consequences if not considered.
Excluding tax advice. One area that many attorneys exclude is tax advice. It’s particularly important to inform the client at the outset of the representation about the possibility that a settlement or damages award may have significant tax consequences. This is also true about the tax aspects of attorney fees, which may be subject to limitations on deductibility that are confusing and often inequitable.
Unless you’re willing to advise your client on tax issues, consider including a provision like this in your fee agreement:
Attorney has advised Client that any settlement or judgment obtained as a result of the representation may be partly or wholly taxable. In addition, the payment of attorney fees hereunder has tax consequences. Attorney has informed Client that any and all tax advice is specifically excluded from the scope of the services Attorney will provide under this agreement. Attorney has informed Client that _ _[he/she]_ _ is not an expert in tax law and has recommended that client obtain advice from a tax practitioner on the tax consequences of any recovery or any other tax matter.
When you expect costs and attorney fees to be a substantial percentage of the total award, consider including tax planning in the litigation strategy by bringing a tax practitioner into the case at an early stage. There are specific contract terms that may work to ameliorate the tax consequences of a settlement or judgment for your client.
For more sample fee agreement provisions and commentary, turn to CEB’s Fee Agreement Forms Manual, chap 1.
Other CEBblog™ posts you may find useful:
- Covering Costs in Contingent Fee Agreements
- Review Your Hourly Fee Agreement
- The Contract that Binds: Your Fee Agreement
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