As a Lawyers! How Do We Calculate Our Professional Fees?

 

When it comes to calculating the professional fees for our firm’s services, we believe in transparency. Therefore, our clients need to understand the mechanism by which we calculate the professional fees of our attorneys. Several factors affect the process of calculating professional fees due to the variation between the nature of the attorney’s profession and other professions. These factors may be variables that are not known at the time of determining the attorney’s fees. How the professional fees are being calculated can be understood based on the following factors:

  • Types of professional fee agreements (lump sum, charging per hour, lump sum with a maximum of hours).
  • The factors that affect the calculation of professional fees.

 

Firstly, it should be noted that the essence of the attorney’s work is the mental effort exerted in studying legal sciences, experiences, analysis, and making comparisons to reach the optimal legal advice or the right decision regarding the matter presented to him in addition to time which  is considered as one of his most important assets. The attorney must allocate his time to work on specific assignments as he cannot accept other assignments since, otherwise, the tasks may accumulate and the rights may be compromised, either intentionally or inadvertently due to the lack of sufficient time, the thing which may lead to customer dissatisfaction.

First: Types of Professional Fee Agreements:

1- Agreeing on charging by hourly rate:

This is considered as the fair and common model in most countries of the world, where charging by hourly rate agreements prevail in both legal consultation and direct legal work, such as drafting contracts and amending them, attending settlement and negotiation sessions, pre-conflict management, acquisitions and mergers of companies, and legal advisory services, which do not include lawsuits or repetitive actions, as the attorney works on an existing legal issue and before the dispute reaches courts or the relevant authority. The attorney works along with the client to handle the situation from a legal point of view. Often, the parties cannot know all the circumstances of the situation or its dimensions. Therefore, they should act according to the attorney’s assessment of the situation and its dimensions from a legal point of view.

In such cases, it is not possible to determine the professional fees in advance, since both parties are not fully aware yet of the dimensions of the situation in a manner that allows estimating a lump sum or a lump sum that guarantees a pre-defined maximum of hours. Hence, both parties agree to charge based on an hourly rate, as the value of the hour differs depending on the respective subject and each consultant according to his experiences, assistants and other factors.

2- Agreeing to work based on a fixed lump sum with a maximum of hours:

This model is a mix between charging per hourly rate and charging a lump sum, and it aims at benefiting from the advantages of both models while avoiding their disadvantages. In this scenario, the attorney determines a maximum amount to be charged for the specific subject, after assessing the situation, provided that the assigned work does not exceed a pre-defined number of hours. In case if the assigned work exceeds the defined number of hours, a different rate is to be charged per hour.

For example:

The below assumption is based on the hourly rate for a specific subject being AED 1200 per hour.

It was agreed that the maximum amount to be charged for a specific subject is AED 6000, provided that the number of working hours does not exceed 7.5 hours, and in case if the said number was exceeded, the hourly rate for extra hours shall be AED 1000 per hour.

In the said agreement, the attorney has secured receiving a specific amount of AED 6000, whether the number of working hours was less than 5 hours, which is the normal price of the hour. Meanwhile, the client has guaranteed to receive services related to a specific subject that may take up to 7.5 hours at a lower price. Moreover, the client is  also ensured that he will benefit from a better hourly rate which is AED 1000, in exchange for paying the determined lump sum.

This pattern is common when the number of variables in a legal subject is pre-defined. For example, when the attorney knows that the drafting of a contract will take 3 hours, 1 hour to amend the contract according to the desire of the client and 1 additional hour to amend the contract according to the desire of the other party, this amounts to an average of 5 hours. Therefore, the charged sum is calculated according to this fact. In such a case, the attorney may benefit from the fact that the contract was drafted in 3 hours and was accepted by both the client and the other party without requests of any amendments. The client may also benefit from two hours of overtime work in case that more than one amendment was required in addition to changing the terms and conditions of the business transaction.

 

3- Agreeing to work based on a fixed lump sum:

This structure fee pattern is considered common in the Middle East is the fixed lump sum fees. This model has already caused several problems among attorneys and clients due to the issues that may arise from such agreements. However, lately, attorneys have become keener on ensuring the clarity of these agreements, after sufficiently studying the dimensions of the various cases and estimating the working hours and any difficulties that they may face according to each subject.

Below is an example of the issues that may lead to conflicts:

  • The owner instructs the attorney to take up an action to prosecute another party by claiming compensation for the delay in executing a contract.
  • The attorney is surprised by the fact that the contractor has filed a lawsuit against the client that is related to the same matter to claim unpaid dues.
  • The attorney is surprised by the fact that a third party (subcontractor) has joined the lawsuit to claim entitlements from the owner and contractor, claiming that both parties agreed with him to carry out works that the owner claims that he has already paid the contractor in charge for.

 

The above model clearly shows that the original lawsuit that the attorney agreed to handle is a delay compensation claim, yet, the attorney was surprised to find a counterclaim asking the owner to pay for entitlements of the entire project. Furthermore, there was an additional claim for other entitlements by a third party. The problem here is that the attorney, when estimating his fees, took into consideration only the time, effort, and possible paths of merely the delay compensation claim. Therefore, a dispute arises between the attorney and the client regarding the fees of each case. Hence, there should always be an agreement on the subject of dispute, and its degrees, if possible, as each subject should have separate fees.

Accordingly, when agreeing on lump-sum amounts, it is important to determine them based on the following: (1) the subject of dispute, (2) included claims, (3) fees, (4) non-covered scenarios and (5) assumptions for cases that may arise and their fees. Often, the attorney adds in the fee agreement that any change in the circumstances of the case will be followed by a change in the estimated fee value.

Second: Factors that Affect the Calculation of Professional Fees:

The following factors contribute in one way or another to the calculation of the attorney’s professional fees. Such factors are considered critical when it comes to estimating fees.

  • The Attorney’s Specialization:

Some attorneys are famous for being specialized in specific areas, such as the law of personal status for Muslims or foreigners, acquisitions and mergers, corporate law, or litigation. In such cases, the attorney demands higher fees based on his experience in the respective area of specialization.

  • The Difficulty of the Subject at Hand:

It is a grave mistake to think that the fees will be the same if the difficulty degree of the subject changes. For clarification, it cannot be possible for the estimated fees of a labor case consultation to be the same as a consultation related to a lawsuit with a bank on bank transactions. Besides, even in each subject, the number of details and that the attorney has to search for and verify and the number of documents that he has to study is considered as a critical factor when it comes to estimating fees. In case of the existence of several agreements, documents and conditions between parties, the matter gets more complicated, the thing which requires an additional mental effort to be exerted by the attorney.

  • The Spent Time:

The time spent on a specific subject shall be taken into consideration when determining the fees. This shall be done by estimating the monetary value for the time spent studying documents, preparing research, writing and reviewing the legal advice for the client and meeting with the client before and after offering consultation to ensure his full understanding.

  • The Value of the Claim:

The value of the claim constitutes an important factor in calculating the value of fees, whether the attorney mentioned such fact or not, the value of the claim is taken into consideration when estimating the fees due to the obligations incurred by the attorney as a result of handling the dispute. For example, if a company assigns you to transfer paper sheets from point A to point B, how much this will cost you compared to transferring paintings that are worth tens or hundreds of millions that you have to deliver and you may bear the financial and professional responsibility if you fail to deliver them successfully? The same applies to the attorney’s seek to achieve satisfactory results, ensure commitment to professionalism and obtain the best results in disputes in which the value of the claim is high.

  • Other Costs:

There are many other costs that the attorney may incur, including the cost of commercial licenses, the cost for consultants and employees, in addition to the training costs incurred by the attorney to train lawyers and consultants to ensure the renewal of their periodic licenses, etc.

(6) Making a Profit:

The attorney’s profession is one of the professions that ultimately aim at making a profit as a natural result of diligence at work.

Finally

At Nour Attorneys and Legal Consultants, we have a very flexible and defined fee structure wherein we offer the legal services by providing our client the options to choose from hourly rates, lumpsum payment with fixed hours and lumpsum payment for the entire matter wherein the scope of the matter is defined in the engagement letter executed between us and the client. We cater to the needs of our client by offering the best suited professional services to the client within fair and reasonable price range. We have the entire team of the extremely talented lawyers providing legal services and advise concerning the various aspects of laws and as well as drafting and delivering bespoke agreement, contracts and other documents exclusively as per the requirements of the client.