Retainer agreements (also referred to as representation agreements) are a type of compensation agreement with lawyers either for reserving their employment or as compensation for future services. Also inside the agreement are details on the scope and procedure for the representation.
Fees
General retainers are the traditional type of retainers where a lawyer agrees to handle a case or future issues that arise for a client. These agreements can be adjusted for the specific needs of the client such as periods of time or preventing the firm from representing competitors, but the goal of a general retainer is to ensure a lawyer or law firm’s availability should an issue arise. The compensation is only for reserving this availability. The lawyer or firm will have further fees for the services performed. This type of retainer typically only appears where the lawyer or firm has special talents or connections with the client.
A more popular type of retainer is a security retainer (also known as a retaining fee) where the client makes a payment for future services, but the money does not go to the lawyer until they earn the compensation. The goal of a security retainer is to ensure that funds are available to pay the lawyer and firm. When the security retainer is paid, it goes into a trust, and not to the lawyer. The lawyer may receive compensation either periodically for services or after finishing the services in the agreement. Sometimes, a client must replace money in the security retainer that is used to pay for lawyer fees. These agreements can entail that the lawyer receives all of the retainer after the services are performed or the client may be able to receive money back or pay more if the lawyer is to bill hourly. While they come in different varieties, the goal of a security retainer is to ensure lawyers receive their payment which can be critical in some areas such as bankruptcy. If a client and lawyer disagree over payments to the lawyer, the funds in question must remain in the trust account until the dispute is settled. A lawyer must also ensure that the trust contains only client funds, except a lawyer may put funds into the account to pay for banking fees.
Another potential type of retainer is an advance fee or advance payment retainer. These agreements simply entail prepayment for services the lawyer or firm will perform in the future. Unlike general retainers which merely reserve the lawyer’s time, any type of advance retainer is actually paying for the services, and unlike security retainers, the payments can go to the lawyer, not necessarily to a trust or special account. Usually, advance fee retainers are all the compensation for the services. However, in some states, advance payment retainers merely cover expected fees for the future services with the client being responsible for any extra fees that accumulate. These types of retainers receive varying treatment across states with some disallowing them altogether because of the difficulties posed to clients in getting prepayments returned.
Outline of Representation
Retainers also should outline the scope of representation for the firm or lawyer. This will range in specificity depending on the needs of the client. For example, in a wrongful termination case, a client likely will just be retaining the lawyer for litigating the termination, but a large corporation may retain a law firm for anything arising out of a specific deal, including the drafting of numerous documents. Putting in writing the scope of representation ensures both clients and lawyers understand what the lawyer is responsible for.
The agreement may include numerous other smaller agreements on the specific needs of a client. Many clients will want the lawyer to avoid taking certain actions that would otherwise be available for many reasons, like protecting public image. Further, clients may want specific commitments from the lawyer on keeping the client up to date or receiving client approval.
[Last updated in April of 2023 by the Wex Definitions Team]