Updated on April 30th, 2023
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.
- Provides clarity to the business relationship between the provider and client;
- Reduces the firm’s liability; and
- Legally binds the client to the payment terms.
Accountant / Bookkeeper Engagement Letter – A document that specifies the services an accountant will provide for their client.
Attorney (Lawyer) Engagement Letter – Used to establish the details of a professional relationship between an attorney and a client before it begins.
Consulting Engagement Letter – Ensures a consultant and their client are clear about the details of their professional relationship.
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.
- 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.
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.
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.
1. THE PARTIES. This Engagement Letter (the “Letter”) is made effective as of [MM/DD/YYYY] by and between:
Client: [CLIENT NAME] with a mailing address of [CLIENT ADDRESS] (the “Client”), and
Service Provider: [SERVICE PROVIDER] with a mailing address of [SERVICE PROVIDER ADDRESS] (the “Service Provider”).
WHEREAS the Client intends to pay the Service Provider for Services provided under the following terms and conditions:
2. SERVICES PROVIDED. The Service Provider agrees to provide the following Service(s): [LIST SERVICE(S)] (the “Services”).
3. COMPENSATION. In consideration for the Services provided, the Service Provider is to be paid in the following manner: [DESCRIBE COMPENSATION].
In addition, the Client may be charged for any administrative fees, filings, or other costs directly or indirectly related to the Services.
4. RETAINER. The Client is: (check one)
☐ – REQUIRED to pay a (☐ Refundable | ☐ Non-Refundable) Retainer in the amount of $[RETAINER AMOUNT (IF ANY)] to the Service Provider as an advance on future Services to be provided.
☐ – NOT REQUIRED to pay a Retainer before the Service Provider is able to provide Services.
5. TERM. The Services shall commence on [MM/DD/YYYY] and terminate upon either party providing [#] days of written notice to the other.
6. ADDITIONAL TERMS.
[LIST ADDITIONAL TERMS (IF ANY)].
7. HOLD HARMLESS. The Client shall be required to promptly provide accurate information to the Service Provider. If any information produced by the Client is not correct, the Service Provider shall be held harmless from any legal, financial, or other liability resulting from such information.
IN WITNESS WHEREOF, the Client and Service Provider agree to the terms and conditions contained in this Letter.
Client’s Signature: ______________________ Date: [MM/DD/YYYY]
Client Printed Name: [PRINTED NAME]
Service Provider’s Signature: ______________________ Date: [MM/DD/YYYY]
Service Provider Printed Name: [PRINTED NAME]