You should always enter into a written fee agreement with your lawyer. Often called retainer agreements or representation agreements, these contracts set out the terms of the lawyer-client relationship.
Some lawyers use formal contracts running many pages in length; others use a simple letter outlining the agreement. The form of the agreement isn't really important -- what matters is that the agreement clearly explains certain key issues, such as how the lawyer's fees will be paid, who will pay for costs of the lawsuit, and who will work on the case (lawyers or paralegals).
Most disputes between lawyers and clients are over money -- specifically, over how much money the client owes the lawyer. To avoid these problems, some states require written fee agreements. But even if yours doesn't, you'll want a written record of what you agreed to pay the lawyer, in case you later have a dispute over legal bills. That way, you can simply consult the contract rather than arguing over who agreed to what.
There are also nonmonetary reasons to put your agreement in writing. First, there may be other important issues that you want recorded, such as who will argue your case if it goes to trial or the circumstances in which either you or the lawyer can end the relationship.
Second, the agreement can clarify the relationship you expect to have with your lawyer. For example, some agreements state that the lawyer will communicate regularly with the client about lawsuit developments or that the client will respond promptly to requests from the lawyer.
Finally, putting things in writing will force you and your lawyer to be very clear about your agreement. It's all too common for each party to have a slightly different understanding of what is being agreed to. Getting your agreement down on paper will insure that you and your lawyer are both on the same page.
First and foremost, a written agreement should explain the lawyer's fee and how it will be paid. The agreement should also explain what fee structure will be used. Lawyers typically charge in one of two ways (for more detailed information on fees, see Attorneys' Fees: The Basics):
Hourly fee. The most common form of lawyer compensation is the hourly rate, which can range anywhere from $75 to $300 or more. If the lawyer's office uses paralegals, you should be charged less for their time -- probably in the range of $40 to $80 per hour.
If you're paying a lawyer by the hour, the agreement should set out the hourly rates of the lawyer and anyone else in the lawyer's office who might work on the case. It should state how often you will be billed, how much detail the bill will include, and how long you have to pay the bill. If the lawyer will require you to pay a deposit in advance (often called a "retainer"), the agreement should include the amount of the retainer.
Contingency fee. In certain kinds of cases, such as personal injury cases, a lawyer waits until the case is over, then takes a percentage of the amount the client wins. If the client hits the jackpot, the lawyer's fee climbs proportionately. If the client loses, the lawyer doesn't get a fee. This method of payment allows lawyers to represent people who have been wronged but can't afford to pay a lawyer.
If you're paying a contingency fee, the agreement should indicate what percentage of any award the lawyer will take, whether that percentage will change over the course of the lawsuit (some lawyers collect a higher percentage if the case goes to trial than if the case settles beforehand), and how the lawyer will collect the money.
Costs of the lawsuit. The agreement should also explain how litigation costs will be handled. These costs include court fees, fees charged by expert witnesses, private investigators, process servers or stenographers, copying costs, travel expenses, or messenger fees, for example. Not surprisingly, litigation costs can really mount up -- especially if a case goes all the way to trial.
Your agreement should spell out which of these costs you'll have to pay, which (if any) your lawyer will pick up, and when you'll be expected to pay them. Some lawyers in contingency fee cases will front the money for costs; if the client wins, the lawyer is reimbursed from the award, but a client who loses has to figure out some way to pay back the lawyer.
Other terms. Although fee arrangements are the most important part of the representation agreement, there are other terms that you or your lawyer might want to include, such as:
For clear answers to your questions about working with a lawyer, see The Lawsuit Survival Guide: A Client's Companion to Litigation, by Joseph Matthews (Nolo).