How to Cover Costs in Your Fee Agreement

money in hand representing costs attorney can recoverIt’s not just attorney fees that you need to discuss in your fee agreement with your client—make sure to cover costs, including whether you’ll advance them. Here are the basics that you need to know, including sample language for your agreement.

State whether you’ll advance costs. An attorney may advance costs under Cal Rules of Prof Cond 4-210(A)(3) even if their repayment is contingent on the outcome of the matter. A provision may allow costs to be advanced by the attorney and then billed to the client, unless the costs can be met out of applicable client deposits. If the agreement is for a contingent fee, the attorney may advance costs and then be reimbursed at the end of the representation, unless the recovery is insufficient and the attorney has agreed to bear the loss.

For example:

Client will pay all “costs” in connection with Attorney’s representation of Client under this agreement. Costs will be advanced by Attorney and then billed to Client _ _[unless the costs can be met out of Client deposits that are applicable toward costs]_ _.

or

Attorney will advance all “costs” in connection with Attorney’s representation of Client under this agreement. Attorney will be reimbursed out of any recovery before any distribution of fees to Attorney or any distribution to Client. If there is no recovery, or the recovery is insufficient to reimburse Attorney in full for costs advanced, then _ _[Attorney will bear the loss/Client will pay to Attorney the unreimbursed balance of the costs advanced]_ _.

List likely costs. List the reasonably likely costs in the particular matter, such as mileage and out-of-town travel expenses. If there will be costs that require the client’s advance approval, add a clause on that. If any items (e.g., in-office photocopying, mileage, computer time) will be passed on to the client other than strictly at cost, their charges should be specified.

For example:

Costs include, but are not limited to, _ _[e.g., court filing fees, deposition costs, expert fees and expenses, investigation costs, long-distance telephone charges, messenger service fees, photocopying expenses, and process-server fees]_ _. _ _[Attorney will obtain Client’s consent before incurring any costs _ _[in excess of _ _[dollar amount]_ _]_ _ for consultants, expert witnesses, or investigators.]_ _

List what’s not included in costs. Try to anticipate and list items that aren’t included in costs but that the client might think are included. This is particularly important when the client will incur medical expenses or may be ordered to pay costs of other parties. The client should be expressly informed that he or she must bear such obligations without any advancement or contribution by the attorney.

For example:

Items that are not to be considered costs, and that must be paid by Client without being either advanced or contributed to by Attorney, include, but are not limited to, _ _[e.g., Client’s medical expenses and other parties’ costs, if any, that Client is ultimately required to pay]_ _.]

Warn of possible liability for other parties’ costs. Some attorneys include specific language advising the client that, if the matter proceeds to trial or arbitration, the client may be required to pay fees and/or costs to other parties and that paying such costs will be entirely the client’s responsibility.

Get entire sample fee agreements along with commentary explaining the provisions in CEB’s Fee Agreement Forms Manual. And learn effective techniques for avoiding fee disputes, including the drafting of fee agreements, in CEB’s On Demand program Attorney Fee Agreements.

Other CEBblog™ posts you may find useful:

© The Regents of the University of California, 2018. Unauthorized use and/or duplication of this material without express and written permission from this blog’s author and/or owner is strictly prohibited.

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