An engagement letter runs to two or three pages and it is the only document governing the relationship between a client and a law firm. It is generally handed over at the end of a first meeting, at the moment a client's attention is entirely on the problem that brought them in, and it gets signed with barely a glance.
It repays twenty minutes. Read in this order, the paragraphs answer the questions that otherwise surface as a surprise in month four.
The scope paragraph, which is the most important one
Somewhere near the top is a sentence describing what the firm is being engaged to do. It might read: to represent you in connection with your claim against a named party arising from a specified transaction.
That sentence draws a boundary. Work outside it is not covered by this agreement, which cuts both ways. The firm is not obliged to handle a related matter you assumed was included, and you are not being billed for one you did not ask for.
Read it against what you actually want. If you came in about a contract dispute and are also worried about a related employment question, the scope decides whether the second one is being handled at all. Ask for it to be added or ask for a separate letter, and do it now rather than after a deadline has run on the part nobody was watching.
Look also for who the client is. If a business is involved, the letter will say whether the firm represents the company or you personally, and those diverge in exactly the situations where it matters most.
Hourly fees, and the details underneath the rate
An hourly agreement names rates, usually by timekeeper: a partner rate, an associate rate, a paralegal rate. Three things sit underneath.
The billing increment. The usual unit is a tenth of an hour, so six minutes is the floor for any task and a two-minute phone call arrives on the bill as six. This is standard. What matters is knowing it, because it changes how you communicate: one email with four questions costs a fraction of four emails.
Who does what. A rate sheet with four names on it is only useful alongside some sense of which work goes to which. It is reasonable to ask that routine work be handled at the lower rate and to say so before the first bill.
Whether rates can change. Many letters allow annual adjustment with notice. That is ordinary in a matter lasting years and worth knowing at the outset.
The word retainer, which means two different things
This causes more confusion than any other term in the document, because it describes two unrelated arrangements.
An advance fee deposit is money you pay up front that the firm holds in a client trust account, drawing against it as work is done and billed. It is still your money until it is earned. If the matter ends with a balance, that balance comes back to you, and the letter should say so explicitly along with whether you will be asked to top it up when it runs low.
A true retainer, less common, is a fee paid to secure the firm's availability. It is earned on receipt and is not refundable, and it buys access rather than hours.
Find out which one you are signing. The distinction is the difference between a deposit and a purchase, and reputable letters say plainly which is meant.
Flat fees, and what falls outside them
A flat fee attaches one price to one defined job. A will, an incorporation, a contract review, an uncontested filing: work whose shape is known before anybody starts. Where that holds it is the cleanest arrangement on offer, and it is the only one a client can budget against exactly.
The paragraph to read is the one describing what happens if the matter stops being routine. A flat fee for an uncontested matter usually converts to hourly if it becomes contested, and the trigger for that conversion should be described rather than left to judgment.
Ask when the fee is earned, too. Some flat fees are earned in stages, which matters if you decide to stop partway.
Contingency fees, and the two places the arithmetic changes
Under a contingency arrangement the firm takes a cut of whatever the case brings in, and a case that recovers nothing costs the client nothing. The arrangement exists so that a claim can be pursued by someone who could never have paid a monthly bill to pursue it.
Two details decide what you actually receive.
The first is the order of operations. Case expenses can come off the recovery before the firm takes its share, or the share can be taken from the gross figure and the expenses charged against what is left of your half. Both are in common use, and on the same recovery they hand you different amounts of money. The letter says which, in a sentence that is easy to read past.
The second is whether the percentage increases at stages: one figure if the matter settles before a lawsuit is filed, a higher one afterward, higher again if it goes to trial. That is common and reasonable, and it is worth knowing where the steps are.
Ask one more question: if there is no recovery, am I responsible for the costs. Firms differ, and the answer belongs in writing.
Costs and expenses, which sit on top of every arrangement
Fees are what the firm charges for its time. Costs are what the matter spends on the outside world: court filing fees, service of process, deposition transcripts, expert witnesses, records requests, travel.
These are billed in addition, under every fee structure including a flat fee, and on a substantial matter they are not small. Experts in particular can rival the legal fees.
The letter should say whether the firm advances costs and bills you later or expects them paid as incurred, and whether there is a threshold above which they will ask before spending. Asking for that threshold to be written in is a reasonable request and rarely refused.
The paragraphs at the end that people never read
Communication: who your point of contact is and how quickly to expect a response. A sentence here prevents the most common complaint clients have about lawyers.
Termination: you can generally end the relationship at any time, and the letter says what happens to unbilled work and to any deposit. The firm's ability to withdraw is narrower and usually requires permission from a court once a case is filed.
The file: who owns the documents and what happens to them when the matter ends. Firms destroy files after a retention period, and if there is something in there you will want, ask for it at the close rather than four years later.
Conflicts: a statement that the firm has checked, and sometimes a request that you waive a potential conflict. Read that one carefully, because a waiver is a decision rather than a formality.
The three questions worth asking before signing
What is your best estimate of the cost to reach the next milestone, and what would make it more. Not the end of the matter, which nobody can price, but the next definable point.
What could I do myself that would reduce the bill. The honest answer usually involves gathering documents and organizing a timeline, and a client who does that well saves real money.
What would make you tell me to stop. A lawyer who has an answer to that is telling you they will say when the case is no longer worth funding, and that answer is worth more over the life of a matter than a small difference in the hourly rate.