Agreed Pricing, also known as Value Pricing, is an arrangement in which a lawyer and a client agree on a price up front for the lawyer’s services in a matter. It is based on an agreed scope of services and the price is a fair reflection of the client’s perception of value. It is also seen in productised services where a lawyer offers a defined scope of service for a publicly stated price.
In non-litigious matters, some agreed pricing arrangements can include contingency fees – that is, the ultimate price is contingent on certain agreed goals and outcomes being met, for example a package of work being finished by a particular date or contract negotiations meeting certain goals. While s.183 of the Uniform Law strictly prohibits contingency pricing in litigious matters, the prohibition does not extend to non-litigious matters.
Frequently asked questions about Agreed Pricing
It depends on how the agreed fee is set. Some agreed fees are calculated by the lawyer based on an estimate of the time the matter will take and so remain essentially time-based. Agreed pricing, while taking time into account, does not base the price on the time spent but on the agreed value of the services provided to the client, or on the lawyer’s scoped standard offering. For example, a lawyer may agree to provide a suite of estate planning documents with extensive advice at an agreed price that reflects the value of these arrangements to the client, rather than reflecting the time spent in preparation. The price must be fair and reasonable, and must take into consideration the factors set out in s.172 of the Uniform Law.
Money the client pays up front for an agreed price or fixed fee, prior to the work being done, is trust money and must be deposited into a trust account in accordance with Part 4.2 of the Uniform Law, unless a specific exemption has been granted under s.130(4) of the Uniform Law.
A lawyer’s costs are required under the Uniform Law to be ‘fair and reasonable’. There is no obligation for a lawyer to record time spent on a matter unless that is the basis on which the costs agreement operates.
Time spent is one of the factors in assessing the reasonableness of the costs, but not the only one, and this means that hours need not be recorded if that is not the basis on which costs are to be charged.
A costs agreement between lawyer and client is presumed to be fair and reasonable if the Uniform Law requirements are complied with.
For more information please see Section 172 of The Legal Profession Uniform Law 2014.
No. There is no definition in the Uniform Law of what must be included in an itemised bill (s.187). The Costs Court, in assessing the bill, will have regard to the principles set out in s.172, the firm’s compliance with the Uniform Law and Rules, the disclosures and representations made to the client and ‘any other relevant factor’ (s.200). If a client wants an itemised bill where a value price has been agreed up front, the bill would detail the work that you did in the course of the matter in accordance with the scope, but you do not need to detail how much time was spent on each task.
Careful scoping of a matter is very important when considering an appropriate price. This includes understanding the client’s expectations of your services, and starts with an agreement as to what the client sees as an acceptable outcome. A clear scope of work will alert both you and the client to a change in circumstances that might warrant renegotiation of the pricing arrangement and an updated disclosure (s.174(1)(b)). Many lawyers who engage in agreed pricing recommend taking a project management approach, which records in detail the steps and stages of the matter.
Unless your client is a commercial or government client, you must comply with the disclosure and other obligations under part 4.3 of the Uniform Law – value pricing makes no difference to this requirement. If the agreed price includes all professional fees and disbursements, that will be the “estimate” which must be disclosed to the client. If it only covers professional fees, then the estimate will have to also include disbursements.
Value pricing takes a significantly different approach to pricing than that based on time-billing. Therefore, lawyers are encouraged to seek training and education on the topic to ensure a disciplined and appropriate approach.
Complex litigation generally has a number of stages and can follow different procedural paths according to the circumstances. A lawyer here can give the client a roadmap explaining the stages of the matter and various points where it might settle – this is an essential communication tool and reference point for the course of the matter. This document should give the client an understanding of the likely overall cost should the matter settle early, or should it go all the way to trial. You can then scope each stage of the litigation separately, arriving at a fixed price up to the end of that stage of the litigation.
At that milestone, the lawyer and client can review the matter, review any changes to the overall estimate and agree the price of the next defined stage of the work. Should the circumstances change significantly during that stage, the estimate can again be updated. In accordance with s174 of the Uniform Law, you must specify in the agreement that the method of charging is by stages (encompassing various tasks) to be agreed and fixed at set milestones.
Agreed pricing is still relatively new. For this reason, where the other party may be paying your client’s costs in litigation, it is advisable to keep a record of how much time you spent on the relevant attendances to make assessment of the costs easier. Otherwise, the attendances can still be costed by reference to the relevant scale.