A Brief Introduction About the Retainer Agreement
What is a retainer agreement? A retainer agreement is a legally binding document drawn between a client and the professional, whose services s/he wishes to hire.
These agreements govern a professional-client relationship wherein the client seeks to retain services to be availed at his/her convenience. It sets down the terms of the contract, which is inclusive of but not restricted to the retainer fee, the duration of the agreement, the rights and duties of the parties, the recourse available upon violation of the terms of the agreement and the ancillary clauses of the agreement. It creates a legally binding relationship between the parties involved and the same is enforced by law. This is the underlying reason behind drafting such a contract and it also provides for seamless enforcement of the terms.
Who Takes the Retainer Agreement – People Involved
You would need to enter into a retainer agreement if you seek to hire the services of a professional to be availed at your convenience and wish to simultaneously create a legally binding relationship. The parties involved in such a contract are the professional and the client.
Purpose of the Retainer Agreement – Why Do You Need It
The main purpose of a retainer agreement is to:
- Retainer agreements offer security to both the clients and the service provider. As the service provider, you would not have to worry about payments and clients.
- You would not have to go out each month looking for new clients and you would not have to work on advertising if you have a few good clients on retainer.
- Retainer agreements also benefit clients. The clients can ensure that the work gets done with a quality that they are satisfied with.
- The clients are allowed an opportunity to negotiate a rate for the services that are provided. This is the flat rate that the clients pay every month.
Contents of the Retainer Agreement – Inclusions
An effectively drafted retainer agreement must be detailed and include the following terms:
- Effective Date: This mentions the date on which the agreement becomes effective. It is a standard, yet critical clause that must be included.
- Parties to Contract: This clause identifies the parties to the contract, that is, the landlord and tenant. It must mention their names and addresses.
- Term: This term gives information about the duration of the agreement.
- Obligations: These outline the obligations of the parties involved in the agreement.
- Rights: These outline the privileges of the parties arising out of the agreement.
- Retainer Fee: This lays out the definition of a retainer and the fee that is being paid to the professional for his services. This also makes provisions for different modes of payments.
- Reimbursements: These provide for the expenses that the professional may incur in the process of rendering his services, which will be reimbursed by the client.
- Violation of contract: This clause lays out the instances under which the contract may be deemed to be violated and the recourse available upon violation.
- Termination: This clause specifies the circumstances under which the agreement may be terminated.
- Process of termination: This clause provides for the method of terminating the contract the parties will abide by while terminating the agreement.
- Governing Jurisdiction: This clause specifies the jurisdiction that will govern any disputes that may arise out of the agreement.
- State-specific Laws: Include any clauses and terms that may be required for compliance with state-specific laws and legislation.
How to Draft the Retainer Agreement
The procedure to draft a retainer agreement:
- Specify the effective date of the agreement, that is, the date on which the agreement will come into effect.
- Identify the contracting parties with their names and addresses.
- Establish the relationship between the parties.
- Outline the various obligations that have to be performed by the parties and the privileges that they have under the contract.
- Include a clause for the retainer fee that is being paid to the professional for the services s/he may render.
- Include a clause for the reimbursements that will be made by the client upon the incurring of expenses by the professional while rendering services.
- Detail the circumstances under which the contract can be deemed to be violated and also highlight the recourse available to the parties upon the violation of the agreement.
- Include a clause for the termination of the contract, detailing the circumstances under which it can be terminated and the process that must be followed for the same.
- The agreement should state the name of the jurisdiction that will govern the document and any disputes that arise from it.
- Have the parties to the contract sign it to signify acceptance of terms.
Make sure that the agreement complies with local, state, and federal laws. Also, make the terms are simple, explicit, and void of ambiguity.
The terms of the contract must be mutually beneficial to instill confidence in the parties of the contract and prevent any disputes that may arise between them. The contract must not be drafted in a manner that is beneficial to one party or that is putting one party at a disadvantage. While negotiating the terms of the agreement, the parties and their representatives should be mindful of the established procedures of negotiation and drafting.
Benefits & Drawbacks of the Retainer Agreement
The benefits of having a retainer agreement:
- It provides an overview of the terms and conditions involved, avoiding ambiguity and miscommunication and any disputes arising out of the same.
- Safeguards interests of both parties.
- Ensures that the professional will render services as per the terms of the contract and secure the payment of the retainer fee to the professional.
- Ensures that the clients fulfill any obligations towards the professional that has been outlined in the agreement
- Provide for legal recourse that can be availed by the parties should a dispute arise
- It outlines any provision for resorting to arbitration as legal recourse.
- It gives the professional assurance that the retainer fee will be paid
- Gives the transaction legal validity.
The drawbacks of having a retainer agreement:
- The expenses incurred in the process of drafting the agreement must be borne by one or both parties.
- Negotiating the terms of the agreement takes time.
- The client will have to pay the retainer fee in advance.
- Deadlocks in negotiations might prevent the retainer agreement from being concluded.
What Happens in Case of Violation
Upon the breach of any of the terms of the contract, the involved parties may resort to the legal resolution of the dispute, either by arbitration, mediation or the conventional dispute resolution method. Disputes should be handled depending on how the agreement suggests, the parties might be required to resort to unconventional methods of dispute resolution before going to court. The damages that are due to either party upon the violation of the contract by the other must clearly be outlined in order to prevent any ambiguity that may arise out of computing the damages.
The expenses that might arise in the process of resolving the dispute will have to be borne by the respectively. However, the parties can avert disagreements by:
- Eliminating the chance of any ambiguity arising out of the contract.
- By ensuring that both parties are aware of the terms and conditions of the contract before ratifying the agreement.
Retainer agreements are used when a client wants to retain the services of a professional for a specified duration. They contain many important terms including the rights and obligations of both the client and the professional. Certain terms in the document include the retainer fee, monthly payment if any, term, termination clauses, terms of violation, damages, and rules clauses. A client who wants to avoid hiring the professional multiple times can resort to a retainer agreement. Additionally, this will give you a comprehensive overview of the terms included in the contract in a single document. The agreement will also outline the legal recourse available to the parties upon the violation or termination of the terms of the contract and lastly, the contract provides legal assurance to both the parties with regard to fulfillment of obligations, payment of fees and other ancillary terms that may govern various situations that might arise out of the contract. The said contract is enforceable by law.