Few documents shape the attorney-client relationship more directly than the fee agreement does. If properly drafted, it sets expectations, reduces disputes, and reinforces trust. If poorly drafted, it can become the source of disciplinary complaints and malpractice exposure. Although fee agreements are contracts, they are also professional instruments governed by the Michigan Rules of Professional Conduct (MRPC) and ethics opinions that impose duties beyond ordinary contract law.
THE RULES
MRPC 1.5 establishes the foundational principle that a lawyer “shall not enter into an agreement for, charge, or collect an illegal or excessive fee.”
MRPC 1.5(c) requires written fee agreements for contingent fee agreements. Written agreements are strongly recommended for all matters and can be beneficial to demonstrate ethical compliance.
Equally important is MRPC 1.4, which requires lawyers to “explain a matter to the extent reasonably necessary to permit the client to make informed decisions regarding the representation.” Fee provisions that are technically permissible but poorly explained may still violate this duty.
Additional constraints arise under MRPC 1.8, 1.15, 5.4(c), and 1.16 when fees intersect with third-party payors, liens, and withdrawal.
DRAFTING THE FEE AGREEMENT1
Clear, plain language
Fee agreements are interpreted according to their plain meaning, and Michigan courts construe ambiguities against the lawyer.2 Ethics Opinion RI-10 cautions that ambiguous fee agreements should be interpreted in favor of the client. Avoid legalese, and write for the intended audience.3
Be thorough and matter-specific
Effective fee agreements address all material aspects of fees and expenses and are tailored to the particular representation. Boilerplate provisions should be reviewed and modified as needed.
Identify the client
Identifying the client is critical, particularly in representations involving families, businesses, or fiduciaries. MRPC 1.13 governs organizational clients, and Ethics Opinion RI-3504 provides guidance in fiduciary contexts. Failure to clearly identify the client invites conflicts of interest and fee disputes.
Scope of representation
The scope of representation must also be clearly defined. Often, lawyers exclude appeals,5 probate,6 Qualified Domestic Relationship Orders, and tax advice.
Limited-scope representation is permissible only when the limitations are clearly explained and agreed upon.7
Nature, basis, and rate of the fee
The fee agreement should clearly establish the type of fee agreement, whether it be hourly, hybrid, contingent, flat fee, etc. Further, it should explain how the fee will be determined, for example, hourly rates, based upon completion of stated tasks, or contingent based upon a specific outcome.
For hourly fee agreements, a well-drafted agreement clearly identifies hourly rates for partners, associates, paralegals, and administrative staff, along with a description of billing practices. Minimum billable increments, such as .1 or .2, should be disclosed and must not be excessive.
Billing practices and frequency
The fee agreement should address how frequently bills will be provided to the client. For example, some lawyers send bills monthly, while others send bills only when work is completed. Regardless of the frequency with which bills are sent, the client should be informed of the billing practices to set reasonable expectations.
Court-ordered fees and sanctions
Ethics Opinion RI-303 specifically recommends that “the issue of court-awarded sanctions should be spelled out in advance of undertaking representation.”8 Failure to do so can result in disputes over whether such awards belong to the lawyer, the client, or both.
Costs and expenses
Fee agreements should specify which costs will be charged to the client. Ethics Opinion RI-364 prohibits surcharges above actual costs,9 and Ethics Opinion RI-363 limits administrative charges in contingent fee matters.10
Interest and late fees
Interest and late fees must be expressly included in the agreement, or they are waived, and may not be illegal or usurious.11 Ethics Opinion RI-40 provides guidance on permissible interest provisions.
Termination
Clients have the right to terminate representation at any time. Lawyers may withdraw only in accordance with MRPC 1.16. Fee agreements should address compensation if representation ends prematurely.12
File retention
File retention policies should be disclosed at the outset, either in the fee agreement or a separate document, and should specify what materials will be provided to the client upon request.13
Effective date and end date
Establishing an effective date and end date in the fee agreement provides reasonable expectations for the client and can set a baseline for later disputes. The fee agreement should include whether it becomes effective upon execution, receipt of an engagement fee or advance payment of fees, when certain necessary documents are received, or otherwise.
Under MCR 2.117(C), representation ends when the “final judgment or final order is entered disposing of all claims by or against the party whom the attorney represents and the time for appeal of right has passed.”
OPTIONAL PROVISIONS WHEN PROPERLY DRAFTED
Referral fees and fee splitting
Referral fees are allowed pursuant to MRPC 1.5(e) if the client is advised and does not object and if the total fee is not excessive. Ethics Opinion RI-234 underscores that fee-splitting arrangements must be transparent and may not increase the client’s financial burden merely to accommodate referral compensation.14 Including the referral fee in the fee agreement is recommended.
Third-party payor arrangements
Often, a client’s fees are paid by a third-party. MRPC 1.8(f) and MRPC 5.4(c) permit third-party payment only if the client agrees and if “there is no interference with the lawyer’s independence of professional judgment or with the client-lawyer relationship.”15 Michigan Ethics Opinion RI-293 emphasizes that the payor does not become the client and that confidentiality and loyalty remain owed exclusively to the client.16 Best practices include identifying the client expressly, clarifying that the payor has no authority over the representation, and specifying the disposition of unused funds.
Arbitration of fee disputes
Fee agreements may include arbitration provisions, subject to the requirements set forth in MRPC 1.19 and Ethics Opinion R-23.17
Limitations on malpractice liability
Fee agreements may not prospectively limit a lawyer’s liability for malpractice unless the client is independently represented in making the agreement. Ethics Opinion RI-319 prohibits offering reduced fees in exchange for malpractice waivers, emphasizing that such provisions undermine public confidence and client protection.18 Moreover, Formal Ethics Opinion R-24 provides the requirements for agreements to limit malpractice.19
Attorney liens
Fee agreements may include statutory or common-law attorney liens when the language is accurate and not misleading. Ethics Opinion RI-04020 cautions that lawyers may not use lien provisions to coerce payment or overstate their legal rights. Any reference to a lien should be narrowly drafted and clearly explained to the client.
Multiple representation and conflict disclosures
Where multiple clients are represented in a single matter, fee agreements should address fee allocation and conflict management. MRPC 1.7 requires informed consent, confirmed in writing, when concurrent conflicts are present. Fee disputes are particularly likely in joint representations, and explicit disclosures addressing how fees will be handled if interests later diverge are recommended.
Moreover, fee agreements should include provisions regarding confidentiality of client information. For example, in representing multiple clients, the attorney may wish to include that all information learned from any client in the joint representation may be shared amongst all clients.
Electronic communication and billing practices
Modern fee agreements frequently address electronic billing, secure client portals, and electronic communication. Ethics Opinion RI-381 provides guidance regarding a lawyer’s use of these tools.21
PROHIBITED PROVISIONS IN FEE AGREEMENTS
Waiver of liability for malpractice in exchange for a reduced billing rate
Ethics Opinion RI-319 expressly prohibits a waiver of liability for malpractice as consideration for a reduced billing rate.22
Circumvention of trust account requirements
Lawyers may not characterize advance fees as “earned upon receipt” merely to avoid trust accounting obligations.23 Similarly, Ethics Opinion RI-189 states that contractual language cannot override MRPC 1.15’s safekeeping requirements.24
Automatic withdrawal for nonpayment
Fee agreements may not include provisions allowing automatic withdrawal for nonpayment of fees. Ethics Opinion RI-20 states that “[i]t is improper at the outset of representation for a lawyer to request a client to sign a stipulation for withdrawal when fees are not paid.”25 Moreover, MRPC 1.16 governs withdrawal and requires protection of the client’s interests and, in litigation matters, court approval.
Prohibited contingent fee arrangements
Contingent fees are prohibited in criminal cases and most domestic relations matters, MRPC 1.5(d).26
Excessive or outcome-based fee enhancements
Finally, fee agreements may not include bonus, success, or value-based provisions that render the total fee excessive. MRPC 1.5(d) states, “A lawyer shall not enter into an arrangement for, charge, or collect: (1) any fee in a domestic relations matter, the payment or amount of which is contingent upon the securing of a divorce or upon the amount of alimony or support, or property settlement in lieu thereof, the lawyer’s success, results obtained, value added, or any factor to be applied that leaves the client unable to discern the basis or rate of the fee or the method by which the fee is to be determined….”27
CONCLUSION
Fee agreements are more than administrative documents; they are foundational to the attorney-client relationship. Clear, thorough, and ethically compliant agreements protect clients, reduce disputes, and safeguard lawyers from grievances and discipline. By emphasizing reasonableness, transparency, and careful drafting, lawyers can transform fee discussions from a source of friction into an opportunity to reinforce trust and professionalism.