Most businesses and individuals enjoy a broad right to contract by which they are free to enter into contracts often subject only to the limitation that the contracts do not violate any existing laws or public policy.

Attorney-client agreements, however, are typically subject to a stricter review. Because the attorney-client relationship is unique and involves different duties, rights and obligations than those of an average business or nonlawyer individual, there are limitations on what attorneys can include in their agreements with clients. Indeed, even if a client agrees wholeheartedly, there are certain terms that are viewed as being in conflict with an attorney's ethical obligations, and therefore unenforceable no matter what. Such terms could even expose the attorney to a bar grievance or discipline.

Thus, many attorneys and firms will take the time to carefully review fee agreements and engagement/retainer letters to make sure that they do not run afoul of the rules and regulations that govern the conduct of attorneys. Below are a few of the limits on attorney relationships that may create problems in connection with standard fee agreements or engagement/retainer letters.

Length of Time

Unlike most contracts, which may have a specified term of application to which both parties agree, attorney-client agreements are more like one-way streets. Clients can terminate the attorney-client relationship at any time for any reason. Provisions in fee agreements that purport to specify a term of performance, against a client's wishes, are typically unenforceable.

On the other hand, attorneys are more limited in terms of their ability to terminate the attorney-client relationship. There are detailed rules that specify when and how an attorney can end an attorney client relationship, such as Rule 3-700 on terminating a representation. The failure to follow those rules can subject the attorney to discipline, sanctions, and even the risk of a legal malpractice claim in situations in which the client suffers harm as a result of the improper withdrawal.

In consideration of these issues, some firms will include in the engagement letter a description of situations in which both parties agree the attorney may seek withdrawal. Such circumstances can include some of the more common reasons that attorneys seek mid-representation withdrawal such as the failure to timely pay fees or expenses; the inability to communicate or locate the client; or the refusal of the client to abide by or follow the attorney's advice.

Notably, however, even when an attorney and client agree on potential terms for withdrawal, withdrawal may still be subject to the approval of a court if the client is engaged in active litigation.

Limiting Exposure

Many jurisdictions prohibit attorneys from attempting to use an agreement with a client, such as the engagement letter, to prospectively limit their liability for malpractice as a matter of public policy. Nonetheless, attorneys in many jurisdictions, including California, are permitted to include mandatory fee arbitration in their agreements with clients. This is because fee arbitration simply determines how a fee dispute will be resolved; it does not limit the attorney's liability for malpractice or guarantee fee recovery.

Who Is the Client?

Given the special nature of the attorney-client relationship, and the duties involved in such a relationship, law firms cannot represent just any client who wants to hire them. This is unlike other business relationships, in which a company can often sell its product to a wide audience.

One restriction on the client an attorney can take on is created by the rules governing conflicts of interest. Because of the unique fiduciary relationship between an attorney and client, together with the ethical obligations owed to clients, attorneys are generally prohibited from simultaneously representing clients whose interests directly conflict. These conflicts are governed by Rule 3-310 of the California Rules of Professional Conduct.

Many attorneys mistakenly believe that all conflicts of interest can be waived or, put another way, that attorneys can represent clients with directly adverse interests so long as they have been provided full disclosure of the situation and consent to the arrangement. The reality, however, is that some conflicts can never be waived, regardless of the amount of disclosure or the degree of client consent.

On the other hand, other situations may permit the attorney or law firm to represent the clients after full disclosure and written consent.

In addition, although not outright prohibited, many attorneys and law firms will avoid representing clients in matters outside of the attorney's expertise. Of course, attorneys with general practices often represent clients in a multitude of areas. But there are those specialties that involve nuanced knowledge and experience. In some circumstances, taking on such matters without the requisite knowledge or experience could violate the attorney's obligation of competence and expose the attorney to liability.

What Is the Fee?

With the exception of public utilities, the free market may dictate the prices at which many businesses can sell their product or service. The same is not true for attorneys.

First, under the ethical rules, the fee charged by the attorney must be reasonable. There is considerable flexibility in determining whether a fee charged by an attorney and agreed to by the client is reasonable. Rule 4-200 identifies several factors to consider, including the amount of the fee in comparison to the value of the services performed, the relative sophistication of the attorney and the client, the difficulty of the questions involved, the required skill to perform the legal services properly, and the experience, reputation, and ability of the attorney performing the services.

Whether a fee is reasonable is most often examined in the context of a lawsuit filed by the attorney to collect a fee that a client has refused to pay. Separately, whether an attorney charged a reasonable fee can be the focus of a bar grievance against the attorney.

Once the attorney-client relationship begins, there are some additional considerations before a fee can be increased as mid-representation fee adjustments are subject to higher levels of scrutiny. For example, if an attorney requests a drastic beneficial shift in the fee mid-representation, such that the client may have “no choice,” such a fee may be unconscionable. However, there are also many acceptable and routine instances in which a fee may be revised during the course of a representation, such as the standard annual rate increase.

Shari L. Klevens is a partner at Dentons US and serves on the firm's US Board of Directors. She represents and advises lawyers and insurers on complex claims, is co-chair of Dentons' global insurance sector team, and is co-author of “California Legal Malpractice Law” (2014).

Alanna Clair is a partner at Dentons US and focuses on professional liability defense. Shari and Alanna are co-authors of “The Lawyer's Handbook: Ethics Compliance and Claim Avoidance.”