Any lawyer that works with your nonprofit should have a contract that represents the engagement, also known as a retainer agreement. This contract will detail the relationship between the lawyer and your nonprofit. Be sure to read the contract carefully and ask questions if there’s something you don’t understand or agree with.
While there isn’t a standard engagement contract that all lawyers use, they usually contain some common clauses. Here is a breakdown of common clauses a lawyer may include in an engagement contract with a nonprofit:
Scope of work. This is one of the most important parts of the contract. This section will state exactly what the lawyer is doing for your nonprofit, and may even exclude services that the lawyer is not doing. For example, if your nonprofit has a dispute over a contract, the scope of work may state that the lawyer will review the contract, consult with your nonprofit on the facts of the dispute, and then render advice on how to handle the dispute. The scope of work may further state that actually handling the dispute, whether by negotiating with the other party or through litigation, is not included in the scope of work and would need to be the subject of another contract. Read this section carefully to make sure you understand exactly what services are and are not included.
Changes in the scope of work. At times, it may be difficult to determine how much is involved in a matter, or how complex a matter is at the outset. This section will allow the lawyer to change the scope of work and charge additional fees in certain situations. The contract should state that if the scope of work changes, the lawyer will contact your nonprofit to discuss the changes and additional fees before beginning the work.
Who is responsible for the work. The lawyer your nonprofit initially meets with may not be the lawyer who actually completes the work. If your nonprofit hires a senior attorney, the senior attorney may have a junior attorney complete the work. If your nonprofit is working with a solo attorney, that attorney may contract some of the work to an attorney outside of his or her firm. Both of these situations are usually okay, but the lawyer your nonprofit initially meets with should have final responsibility for the work, regardless of who completes it at various stages.
Who the lawyer represents. Because your nonprofit is, legally speaking, a corporation, a lawyer’s contract may indicate that the lawyer represents the corporation, and not the individual board members. This means that if a board member has a legal issue and turns to the nonprofit’s lawyer for help, the lawyer may not be able to advise on that issue, especially if it involves a legal issue with the nonprofit.
Lawyer’s fee. This section will discuss the lawyer’s fees for your nonprofit’s particular matter. There may be several fees listed in this section depending on the matter. For example, if the lawyer is reviewing a contract on a flat-fee basis and completing negotiations on an hourly basis, the lawyer’s fees may be stated as a flat-fee of $500 to review the contract, and negotiations charged at a rate of $200 an hour. The lawyer may also state estimated hours to complete hourly work, although this is often difficult to estimate. As with the section detailing the scope of work, review this section carefully so your nonprofit knows exactly what it’s being charged for.
Other expenses. In addition to the lawyer’s fee, filing fees are associated with many services, such as forming a nonprofit corporation, filing for 501(c)(3) tax exemption, and filing paperwork with a court. The contract should state what these expenses are and when they are due. Lawyers may also state that they will not file paperwork until the filing fee is paid, and that they do not advance these fees on behalf of a client.
Points of contact. It’s important to know who to contact for each party. If your nonprofit is hiring a solo attorney, then it’s easy to know to contact the attorney. However, if your lawyer, or team of lawyers, is with a large firm, your nonprofit needs to know who to contact with questions. Similarly, your nonprofit is a corporation with several board members, so the lawyer needs to know who to call with questions and updates about your nonprofit’s case or matter.
No guarantee. Lawyers cannot guarantee outcomes of cases or matters and will usually state that in their contracts. Lawyers will do their best with the facts handed to them, but many times a final resolution is out of their hands. For example, if your nonprofit is involved in a trademark dispute, a lawyer can’t guarantee that the dispute will never end up in a courtroom, or that if it does find its way to court, your nonprofit will win. The lawyer will give your nonprofit the best- and worst-case scenarios and advise on how to proceed from there.
Disputes. Many lawyers will put a dispute clause into their agreements. This clause may urge open communication if your nonprofit is concerned or unhappy with the representation. It may also state that if a dispute cannot be resolved, both parties agree to take the dispute to a local bar association and to abide by the state’s professional rules of conduct for attorneys.
Hours. Lawyers may list their normal business hours in the agreement and include a policy that, if your nonprofit needs services outside of the normal hours, higher fees will apply. For example, a lawyer may have a normal hourly rate of $200, but that fee may double if your nonprofit needs assistance during the evening or on weekends. This is important to keep in mind when contacting your nonprofit’s lawyer after hours.
Grounds for withdrawal. A lawyer may list specific reasons that would give grounds to withdraw from your nonprofit’s case or matter. These may include your nonprofit not paying its bill on time, not providing information the lawyer needs in order to complete the representation, or lying about facts pertaining to a case or matter. This section should include the process for withdrawal, such as sending written notice of the withdrawal, instructions to retrieve your nonprofit’s file, and the effective date of withdrawal.
Cloud or paperless policy. Many lawyers are using the cloud for storage of client files and have also gone paperless. Some states mandate that if a lawyer uses these online options, they need to provide written notice to the client and adhere to cyber security measures. Many lawyers who use these options allow clients to opt out. Be sure to discuss any safety concerns with your lawyer before agreeing to cloud storage or paperless communication.
Signature block. This may seem simple, but signature blocks are important in a contract. For the lawyer, the lawyer may sign his or her own name, or sign on behalf of the law firm. For your nonprofit, a board member or officer will likely sign the contract. It’s important that the board member or officer sign on behalf of the nonprofit, not as an individual. If signed as an individual, the board member or officer may be held personally liable on the contract.
A lawyer’s engagement contract is usually open to some form of negotiation. If there is a clause that’s included in the contract that your nonprofit wants deleted or one that needs to be added, ask the lawyer to make the changes. Your nonprofit’s relationship with its lawyer is an important one, so it’s important that both parties are comfortable with the terms of the engagement.