Although you should always memorialize your attorney-client fee agreements in writing, there are some limited circumstances in which an oral agreement covering attorney fees is legally permissible. How many of those circumstances can you identify?
- Very small cases. An oral agreement may be sufficient when it’s reasonably foreseeable that the total expense to the client, adding fees and costs, won’t exceed $1000. Bus & P C §6148(a).
- Case between merchants with capped fees. Fee agreement may be oral when the case involves certain claims between merchants (as described in Com C §2104), in which case fees for services are limited to the amount described in Bus & P C §6147.5.
- No time for writing. When there’s foreseeable prejudice to the rights or interests of a client with an emergency need for legal services, or when a writing is otherwise impracticable, an oral agreement is enough. Bus & P C §6148(d)(1).
- Implied by past services. An oral agreement is enough when an agreement on fees can be implied by the fact that the attorney previously rendered services of the same general kind and the client paid for them. Bus & P C §6148(d)(2).
- Client waives a writing. If a client knowingly states in writing that a written fee agreement isn’t required after a full disclosure of Bus & P C §6148, oral agreement is permissible. Bus & P C §6148(d)(3).
- Client is a corporation. A fee agreement need not be in writing when the client is a corporation (Bus & P C §6148(d)(4)) unless the attorney accepts work for a corporation on a contingency fee basis (Bus & P C §6147).
Knowing about these circumstances may come in handy, but don’t get too relaxed about written agreements. Written agreement are required by Bus & P C §6147 for contingent fee agreements and by Bus & P C §6148 for other written fee agreements. Failure to have a written attorney-client agreement for fees when required renders the agreement voidable at the client’s option. If the client does void the fee agreement, then a court may use quantum meruit to decide what your fees should be.
And an oral agreement is subject to a 2-year statute of limitations (CCP §339), as opposed to the 4-year limitation period applicable to written instruments (CCP §337).
For more on general attorney-fee agreements, including sample agreement language for various situations, turn to CEB’s California Client Communications Manual: Sample Letters and Forms, chap 3, and CEB’s Fee Agreement Forms Manual, chap 1.
Other CEBblog™ posts you may find useful:
- How to Cover Costs in Your Fee Agreement
- Don’t Forget to Include Client Responsibilities in Your Fee Agreement
- 2 Key Provisions for Your Fee Agreement
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