Retainer Agreement: Purpose and Who Needs One
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What is a Retainer Agreement?
A retainer agreement is a work-for-hire legal document or a service contract between a company or an individual and a client. It falls between a one-off-contract and a permanent employment contract. It allows clients and customers to pay in advance for professional services of a company or individual.
You can read more on retainer agreements here.
Retainer Agreement Templates
Purpose of Retainer Agreements
The purpose of the retainer agreement is to set out the duties of the parties so that all parties have an agreement on the services that will be provided, how they will be provided, when and at what cost. Retainer agreements are typically used to hire lawyers and freelancers, although they may also be used for consultants, accountants, and other professionals.
The retainer fee ensures that the hired service provider reserves time for the client in the future when there is a need for their services. Unlike a one-time contract, a retainer agreement is a long-term work-for-hire contract and thus can retain ongoing services.
Here more on uses of a retainer agreement.
How Retainer Agreements Work
Retainer agreements do not work on a single formula. However, there is a basic structure followed in all retainer agreements. One party, like a contractor, agrees to provide certain number of hours or certain deliverables each month to the client. In exchange for locking in those hours or deliverables, the client pays a certain amount of fee, called the retainer fee, in advance to the contractor. Once the work is complete, the retainer fee applies to what the contractor is owed, and other hours will be billed at the contractor’s set rate.
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Advantages of Retainer Agreements
Retainer agreements are gaining popularity as service industries need more income stability and try to improve client relationships. Retainer agreements are widely used for legal services, consulting services, accounting services and by freelancers. Here are some benefits of using a retainer agreement:
- Stability: A one-off contract might not bring stable income to an individual or company that is offering its services. However, a fixed retainer fee associated with a retainer agreement ensures stability.
- Time Saved on Marketing: Given that freelancers and professionals would need to look for other clients after a one-off contract ends, marketing commitments are high in a one-off contract for the professional. In a stable retainer agreement, they benefit from a stable fee from the client and a long-term relationship with the client. Thus, they do not have to spend more time marketing themselves.
- Improved relationships: A retainer agreement is a long-term professional relationship. It ensures that the professional is available when needed by the client. This ensures a long-term partnership.
- Predictable Cash flow: Since retainers use an agreed upon retainer fee over a long period of time, it also makes it easier to estimate and maintain cash flows.
- Improved Work: With a retainer agreement, a professional Is paid on a continuous basis, allowing them to focus entirely on the clients’ needs and produce high quality work.
Disadvantages of Retainer Agreements
Retainers come with multiple benefits. Most freelancers and companies would agree that its benefits outweigh the drawbacks. However, there are drawbacks to a retainer agreement for both the client and the professional. Some of them are discussed below:
- Time: A retainer agreement the professional commits to a certain number of hours to the client. This means that they are being locked into a specific schedule.
- Opportunity: Being locked into a specific schedule means that the professional might have to pass on exciting opportunities that might come their way.
- Risk: For a client, retainer agreements can pose some risks. The client pays for the services before receiving them. In months where services are not needed, the client still pays for the hours agreed upon, thus losing money.
Here more on risks and benefits of a retainer agreement.
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Who Needs a Retainer Agreement?
A retainer agreement is widely used in the legal field. It is common for people seeking legal services or anticipating needing legal services to pay a retainer fee to a lawyer who will be available when they need them. This retainer can be an advanced payment for a monthly recurring payment to the lawyer.
Retainer agreements are also used by consultants to provide services to a client over a long-period of time. Especially when the client and professional have established a relationship and the client predicts needing the consultant’s expertise, a retainer agreement provides access to the consultant’s time and services. Freelancers also find retainer agreements to be beneficial. Freelancers often struggle to find a stable source of income and a predictable cash flow. A retainer agreement is a great way to ensure that they have a stable income over a long period of time.
Are you planning to sign a retainer agreement? Here are some things you should consider.
Types of Professional Services Retainer Agreements
There are two types of retainer agreements that a company or individual can use:
- Pay-for-work retainers: Pay-for-work retainers are often used by companies and professionals that intend to receive ongoing payment on a monthly basis from their clients. This type of a retainer agreement is used when relationships with clients is slightly underway. Companies or professionals get paid for the hours of the work they provide. Pay-for-work retainers are not much different from a contract. However, unlike a one-off contract, professions under pay-for-work retainers are in a loop to deliver services to the client over a long period of time.
- Pay-for-access retainers: When companies and professionals prefer to get paid for making their expertise and knowledge available to clients, they use pay-for-access retainers. Under this, the client retains the profession on an ongoing basis when services are needed. This is generally used when the client has formed a relationship with the professional and trusts them to deliver high-quality services whenever required.
Here more on types of a retainer agreement.
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Kenneth G.
Kenneth E. Gray, Jr. is a business and tax attorney who advises entrepreneurs, investors, and closely held companies on transactions, tax planning, disputes, and long-term wealth structuring. He focuses on helping clients make legally sound decisions that also make business sense. Ken’s practice includes business formation and restructuring, mergers and acquisitions, private investments and fundraising transactions, contract drafting and negotiation, and cross-border matters. He also maintains a significant tax practice, advising on federal and state structuring, specialty filings (including partnership, corporate, and non-resident matters), and representing clients in disputes before the U.S. Tax Court and other federal and state tribunals. In addition to his transactional work, Ken handles commercial and business litigation, including tax controversies, financial disputes, and partnership matters. His litigation experience informs how he structures deals and governance documents, with an eye toward preventing disputes before they arise. Ken also advises individuals and families on estate planning, trust formation, tax-efficient wealth transfer strategies, and probate administration, including planning involving closely held businesses and foreign assets. Before practicing law, Ken worked in banking and private equity, including managing a $5 billion emerging markets fund-of-funds portfolio at the U.S. Overseas Private Investment Corporation (OPIC) and serving in equity research at ABN AMRO. That financial background allows him to understand transactions from both the legal and capital perspective. He holds a J.D. from Georgetown University Law Center and an MBA from Yale University. He practices before the U.S. Tax Court, various state courts, and other federal courts.
"It is not easy to find a lawyer that knows Offshore Asset Protection Trusts, which own a foreign LLC, which owns a USA LLC. Fines could reach $100K if the tax forms are incorrect, or not filed. He was able to review my draft returns and provide memos with required changes (many, many changes), after 1 follow-up everything was basically done other than a few tiny edits. I really appreciated how he worked me in, right in the busiest time of tax season, to ensure there were no errors. Would definitely hire again."
Darryl S.
Darryl S.
I offer flat/fixed fees rather than hourly work to help lower your legal costs and align our interests. I specialize in contract law and focus on making sure your contract is clear, protects your interests and meets your needs. You can expect fast, straightforward communication from me, making sure you understand every step. With my experience, you'll get a detailed review of your contract at a fair, fixed price, without any surprises. I have over 30 years of business and legal experience that I bring to your project. I graduated from The University of Texas School of Law with High Honors in 1993 and practiced at Texas' largest law firm. I have founded companies and so understand how to be helpful as both a lawyer and business owner.
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NY Admitted Lawyer 20+ years of experience. Focused on Startups , Entrepreneurs, Entertainers, Producers, Athletes and SMB Companies. I have been a part of numerous startups as Founder, CEO, General Counsel and Deal Executive. I have been through the full life cycle from boot strap to seed investors to large funds-public companies to successful exit. Let me use my experiences help you as you grow your business through these various stages. We saw a market for an on-line platform dedicated to Virtual General Counsel Services to Start Ups and Private Companies.
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Michael B.
Michael has extensive experience advising companies from start-ups to established publicly-traded companies . He has represented businesses in a wide array of fields IT consulting, software solutions, web design/ development, financial services, SaaS, data storage, and others. Areas of expertise include contract drafting and negotiation, terms of use, business structuring and funding, company and employee policies, general transactional issues as well as licensing and regulatory compliance. His prior experience before entering private practice includes negotiating sales contracts for a Fortune 500 healthcare company, as well as regulatory compliance contracts for a publicly traded dental manufacturer. Mr. Brennan firmly believes that every business deserves a lawyer that is both responsive and dependable, and he strives to provide that type of service to every client.
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Ross F.
I am an experienced technology contracts counsel that has worked with companies that are one-person startups, publicly-traded international corporations, and every size in between. I believe legal counsel should act as a seatbelt and an airbag, not a brake pedal!
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Business Contracts
Retainer Agreement
Washington
What are the key elements that should be included in a retainer agreement?
I am in the process of hiring a lawyer to handle a complex legal matter and they have asked me to sign a retainer agreement. I am not familiar with the specifics of a retainer agreement and want to ensure that I understand the key elements that should be included in such an agreement. I want to make sure that my rights and interests are protected, that the scope of work is clearly defined, and that the fees and billing terms are fair and transparent.
Merry K.
That is an excellent question, and I wish more people asked. Every attorney writes these differently, but, like all contracts, retainer agreements are usually written to benefit the author, and it's often difficult to negotiate changes. For a very large and costly project, please consider paying either a contracts attorney or an ethics attorney for an hour or two of his or her time to review the proposed retainer before you sign, and perhaps help you negotiate it. One of the things to look for is (are) hidden costs - for example, will the law firm charge you $36 every time they write a one sentence response to an email question you may have? Will you or they be paying for experts - if so, who will be used, and will you have any say in their selection? How much will the experts charge? (EG - a doctor in a personal injury case could charge $1500/hour). Does the retainer include language regarding how disputes between you and the law firm will be resolved? Does the retainer fully comply with the Washington State Rules for Professional Responsibility? https://www.courts.wa.gov/court_rules/?fa=court_rules.list&group=ga&set=RPC (Please note - the court website system has been having technical problems - in addition to the rules, there are also innumerable opinions interpreting the rules - only a true ethics attorney will be on top of all of these).
Business Contracts
Retainer Agreement
Washington
Can a lawyer increase the retainer fee outlined in the retainer agreement after the agreement has been signed?
I recently hired a lawyer to represent me in a legal matter, and we entered into a retainer agreement that outlined the scope of the representation and the retainer fee required. However, after a few weeks, the lawyer informed me that they would be increasing the retainer fee due to unexpected complexities in my case. I am wondering if this is permissible under the retainer agreement, or if I have any rights to challenge this increase and continue with the original agreed-upon fee.
Merry K.
Thank you for your question. The answer is going to sound a bit vague, but a retainer agreement is a type of contract - like any contract, the answer depends on the terms of the agreement itself. Please read the agreement very carefully, and see whether or not an increase in the retainer is allowed or not under the terms of the agreement as written. Also, please note that most often, a retainer is simply a down payment on hourly fees that will be charged - if that's the case, the attorney will have more flexibility in asking you to pay in advance. If, on the other hand, you are being charged a flat fee for a service, the attorney may have less flexibility in changing the terms. I suggest that you carefully read through this page of information from the Washington State Bar Association for additional information: https://www.wsba.org/for-the-public/concerns-about-a-lawyer
Litigation
Retainer Agreement
Maryland
either in a flat fee or with a retainer, do attorneys charge for wait time in court/travel time to and from?
Have a protective order hearing coming up. I have the option of using a lawyer with no retainer agreement, but a deposit and an hourly rate or one with a retainer deposit and an agreement. In either case, is wait time in court charged at the hourly rate?how about travel time?
Michael T.
Generally speaking, we charge for all time spent on a file. If I'm away from my desk for your case, then I can't work on other cases. So, yes, a five-minute hearing in court might result in a two-hour bill, because that was two hours dedicated to your case. That's why lawyers like to schedule multiple cases for the same hearing: we can pro-rate the travel and waiting time over multiple cases. Flat fees do not normally get a charge for travel or waiting time, because that time is included in the flat fee. A lot of judges start their hearings by "calling the docket" (bringing up each case one by one) and getting time estimates; then calling the cases beginning with the shortest time estimates. Some judges leave all the cases without lawyers to the end. This results in (A) the people involved in cases without lawyers see how it's done; and (B) the lawyers spend less time sitting around waiting and go back to being productive.
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