Flat Fee

By David Weisman, Esq.
Board Certified Real Estate Lawyer 
September 2010

"How much will this cost?" A simple and fair question to which there should be a simple answer. When a person goes into a store, there is a price tag. The customer can see the item and make a decision to buy or not to buy. On the other hand, the merchant has the item hanging on the shelf; and, the merchant knows the cost of the item and the cost of running the store. Based on that, the merchant can set the price in order to make a reasonable profit.

Now, let's say the customer needs legal services. The client asks the lawyer, "How much will it cost?" It's a fair question but not as easy to answer.

You see, the merchant and manufacturer know how much fabric it takes to make a shirt; how many nails it takes to put a piece of furniture together; and how many parts it takes to build a car. However, the lawyer cannot know always how many hours it will take to solve a problem or make a deal.

That said, sometimes, if the lawyer is asked to do something which involves a specific activity that takes a predetermined amount of time, then the merchant-consumer analogy can apply. In that case, a lawyer can estimate, based upon having performed the same service before, the cost of the services to be provided. The "flat fee" is an estimate, based upon the lawyer's experience as to the amount of time a task should take. However, each client and each case is different, so if issues arise which affect the handling of the case, the fee would be adjusted.

"How does a lawyer set his or her fee?" Like the merchant, the lawyer must be able to expect a reasonable profit. If the fee is too low, the lawyer cannot afford to stay in business; and, if the fee is too high, the client will take his or her business elsewhere.

The solution is for the attorney and client to reach an understanding that establishes a flat fee but with the assumption that no complications arise which would require an unreasonable amount of time. For example, if the matter requires custom crafting of a transaction, when the fee assumed a standard transaction, the fee would need to adjust accordingly.

It was Abraham Lincoln who said, "A lawyer's time and advice are his stock in trade." Therefore, it is imperative that the attorney and client manage their respective expectations and communicate them effectively to ensure a long and mutually beneficial relationship.