Understanding Billing by Attorneys
Attorneys often refer to a quote attributed to Abraham Lincoln: “A lawyer’s advice is his stock in trade.” Attorneys must earn their living by billing clients for the advice they give and for their expertise in dealing with the complex legal field.
Clients often have no idea how attorneys bill, and they may not understand the bills once they receive them. The following may prove helpful should you hire an attorney to do work for you.
First, like bills issued by doctors, plumbers, electricians and other service providers, bills issued represent work done for you, as well as some operating expenses. Common terms connected with legal billing are “hourly rate,” “retainer,” and “contingent fee arrangement.”
The “hourly rate” is the amount an attorney charges on an hourly basis to perform work for the client. Hourly billing is the most common billing method used by attorneys.
In an hourly billing situation, you should ask what intervals of time the attorney bills in. The common way to break down the hourly rate for billing is to use tenths of an hour (each 1/10 is a 6 minute interval), or quarters of an hour (each ¼ is a 15 minute interval). For example, a 5 minute phone call would either be billed at 1/10 (.10) of an hour, or at ¼ (.25) of an hour, depending on the attorney’s “minimum billing interval.” The difference could significantly affect your bill, and inquiries should be made at the outset of the representation. Many attorneys record their time by computer entries, and the bill which is generated and sent to the client is a summary. If you want an itemization of your bill, call the attorney’s office and request it.
Regardless of what type of fee arrangement you enter into, it is important for both clients and attorney to put the agreement concerning the fee in writing. This agreement should include the billing method, the hourly rate or contingent fee amount, and should discuss the concept of a “retainer.”
A “retainer” is an amount of money paid by a client toward legal fees. Like a down payment, it is paid at the beginning of the attorney’s representation, usually when the attorney is billing on an hourly basis. The total services and costs are subtracted from the “retainer,” against which further work will be performed. You should ask if your attorney requires replenishment of retainers, and also whether the retainer is “refundable” or “non-refundable.” Some attorneys feel that any unused portion of the retainer would be earned, because of the attorney’s skill in a accomplishing the client’s goal. Other attorneys will issue a final bill upon conclusion of a matter, and any unused portion of the retainer will be refunded.
For some legal services, the attorney may be able to quote a “flat fee” – a single, onetime charge. The type of fee arrangement usually applies to a preparation of a deed, or a Will, or one court appearance.
The other method of billing is the “contingent fee arrangement.” Put simply, the attorney’s fee is contingent upon winning the case. This arrangement is used primarily for personal injury cases.
It is important to remember that for any attorney’s bill, you should have a clear understanding of how the services you receive will be paid for. Don’t be afraid to ask questions, and make sure your fee arrangement is put in writing.