The Need for a Clear Agreement

The Need for a Clear Agreement

When in-house lawyers retain outside counsel on behalf of their companies for what they anticipate might be a long-term relationship, they often use a retention letter or agreement. Those documents typically do not address many aspects of the relationship that they may think they are initiating. Mr. Lauer explores the pressing need for clear communication and intent in drafting these sorts of agreements.

Mr. Lauer writes:

Lawyers understand the need to have a "meeting of the minds" in order to create an enforceable contract. Moreover, they also appreciate that a contract that establishes an ongoing relationship between two organizations, such as a partnership agreement, should contain standards by which to measure the continuing success of that relationship. For example, a real estate joint venture agreement probably would include items that define the parties' relative shares of profit or loss, the mechanisms by which they expect to make decisions regarding the management and disposition of the assets and address other issues.

When in-house lawyers retain outside counsel on behalf of their companies for what they anticipate might be a long-term relationship, they often use a retention letter or agreement. Those documents typically do not address many aspects of the relationship that they may think they are initiating. Besides the basis on which counsel's fee might be calculated and a few other issues, however, those agreements leave for later discussion (if ever) how the client and its counsel expect to work together. Even "outside counsel guidelines" (or a similar set of rules or advisories) that law departments often provide to their outside firms typically do not address what we might refer to as "relationship" issues, focusing instead on many actions that implicate the substance of the arrangement and the fees and billings. While such guidelines might indicate the frequency and scope of reports that the law department expects of outside firms, how the outside and inside attorneys will work together on a day-to-day basis typically falls outside the ambit of those documents.

As one example, the Corporate Counsel Committee of the Section of Business Law of the American Bar Association issued a seven-volume publication that included a chapter on managing outside counsel that included a form of retention letter. Even with the outside counsel guidelines to be included as an integral part of the retention letter, outside counsel would receive sparse guidance as to how to work with the in-house attorneys. Much of that would be defined as time and work progressed. Unfortunately, allowing important issues to go unaddressed on the assumption that they can and will be identified and resolved in the course of performing the work may allow those issues to remain unresolved until they reach such a level that they undermine the relationship. The expectations have relevance to all aspects of the relationship, even possible alternative fee arrangements. [footnotes omitted]

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