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Engagement Letter Template

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An engagement letter is a document used to establish a working relationship between a firm and a client hiring their services. It is prepared before any legal or financial services are provided to outline the costs, contract length, and each party’s responsibilities, thereby setting clear expectations for both sides and minimizing the firm’s liability.

Engagement letters often contain fewer formalities than legal contracts yet remain legally binding once signed by both parties.

Types (3)

Audit (Accountant / Bookkeeper) Engagement Letter – A document that specifies the services an accountant will provide for their client.

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Attorney (Lawyer) Engagement Letter – Used to establish the details of a professional relationship between an attorney and a client before it begins.

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Consulting Engagement Letter – Ensures a consultant and their client are clear about the details of their professional relationship.

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What is an Engagement Letter?

An engagement letter is a document prepared before a firm begins providing services to a client. The letter’s purpose is to set forth clearly what the client should anticipate regarding the terms of the professional relationship they’re entering into with the lawyer, accountant, or consultant in question. By preparing the document, a firm can ensure its client is aware of all the necessary information and that they accept the terms and conditions.

What’s Included?

  • The Parties (Identification) – The names (or the entity’s legal name) and mailing addresses of the involved parties.
  • Services – A summary of the services that will be provided to the client.
  • Cost (Fees) – The compensation that must be paid by the client and the payment terms (e.g., hourly, flat-rate, commission, etc.).
  • Retainer – A provision informing the client whether they are required to pay a retainer and, if so, the amount.
  • Term – The date on which the firm will begin providing services and whether it will end upon the completion of the services, on a specific date, or by written notice from either party.
  • Signatures – The parties’ printed names, signing dates, and signatures.

What are the advantages of an Engagement Letter?

An engagement letter provides a written record of the parties’ roles and responsibilities, reducing the firm’s legal liabilities. The client can be sure of when the services will be completed and how much they can expect to pay, while also acknowledging that the final cost is subject to change. An engagement letter also informs clients that services that are not covered in the letter will require additional fees. The letter may be revised periodically to allow price adjustments or other changes to be accounted for.

What’s a Retainer?

A retainer is an advance payment for services that the client will receive in the future. Depending on the engagement letter’s terms, a client may be obligated to pay a retainer when hiring the firm as part of the agreement terms, which may either be a refundable or non-refundable payment.

Frequently Asked Questions

Is an engagement letter legally binding?

Yes, an engagement letter is legally binding after both parties have signed.

Who signs the engagement letter?

The firm and the client must sign the engagement letter for it to take effect.