Items to Keep in Mind in Your Search

Robin Conrad
Senior Vice President
National Chamber
Litigation Center U.S. Chamber of Commerce

Negotiating legal costs can be intimidating for anyone-particularly for small business owners. Standard ways to pay for basic legal services include hourly fees, flat or project fees, retainers, contingency fees, percentage fees, or a combination of these methods. There are also some unconventional payment arrangements including stock interest in your business or by barter.

Below are a few key points to keep in mind as you negotiate legal costs with your lawyer: 

• Consider a Flat or Project Fee for a Routine Task. A flat or project fee is a fee fixed in advance intended to pay for all your lawyer's services. Most lawyers will quote you a flat fee for routine, uncomplicated legal matters such as preparing a lease or incorporating a small business. 
• Be Aware of the Four Types of Retainers. If your lawyer suggests a retainer, find out exactly what kind. There are four kinds: Case, which is a fee paid at the beginning of service; Advance Against Costs, which is collected before work is begun and where any unused portion is returned to the client; Pure, which is an annual fee that binds a law firm to make its services available to the client; and Retainer for General Representation, a fee for general representation on a regular, periodic basis for a limited amount of work.
• Consider Contingency Fees for High-Risk Matters. Under this arrangement, you pay for legal services only if your lawyer wins your case or enters into a settlement agreement that you approve. A contingency fee may be structured so that your lawyer gets a particular percentage of your recovery. Contingency fees are commonly used by plaintiffs in personal injury matters, and they may be unethical in some other types of cases such as criminal matters.  
• Generally Avoid Percentage Fees. A percentage fee is computed on the basis of the total amount of money or the value of the property involved in a particular situation and is paid regardless of the case outcome. The drawback is that it bears no relationship to the services, skill, or time your lawyer provides. 
• Consider a Combination of Fees. In some circumstances, a combination of fees may serve you best and reduce your out-of-pocket expenses.
• Commit Your Agreement to Writing. To avoid any misunderstanding, obtain a written agreement that defines the services your lawyer will provide and the fee arrangement.

Remember you are the client, and the lawyer works under your direction. Ask your lawyer to provide an estimate of how much time he or she expects your case to take. And always communicate your expectations.