Lawyer Contract: Potential Pitfalls and How to Avoid Them

Law firms increasingly rely on standardised lawyer contracts to onboard clients efficiently and give them clarity. Yet it is precisely in the general mandate conditions and the fee agreement that formalities decide whether a clause holds up in court — or whether the lawyer ends up falling back on the statutory fees.

This article walks through the most common pitfalls in the lawyer contract and how to avoid them in practice. Note that the statutes referenced here are German (BGB and RVG); the underlying principles, however, apply to attorney engagement letters more broadly.

General mandate conditions: transparent and without unreasonable disadvantage

While it has long been standard in other liberal professions to attach general terms and conditions to every engagement document, the lawyer as a user of general mandate conditions is still a comparatively recent phenomenon.

The interplay between professional conduct rules for lawyers and the law governing standard terms makes it far from easy to agree valid clauses. The judgment of the Cologne Regional Court (Landgericht Köln) of 24 January 2018 illustrates this well, examining in detail the terms and conditions in a mandate agreement and their validity. The pitfall there was above all the content review under Section 307 of the German Civil Code (BGB), which several invalidly drafted clauses failed to survive.

The decisive standard is the transparency requirement in Section 307(1) sentence 2 BGB: a clause is invalid if, from the perspective of a careful reader, it is not drafted clearly and comprehensibly. Added to this is the prohibition on unreasonable disadvantage under Section 307(2) BGB. Valid mandate conditions must stand up to both tests.

The fee agreement belongs in a separate document

Fee agreements, too, repeatedly give rise to uncertainty over whether individual provisions — or the contract as a whole — would survive judicial review.

A fee agreement is called for above all where the statutory fees do not amount to appropriate or cost-covering remuneration. If the lawyer wants to charge more than the statutory remuneration, an express agreement with the client is required.

A note on the legal position: Older articles still cite Section 3(1) of the BRAGO here. However, the Federal Regulation on Lawyers' Fees (BRAGO) was replaced by the Lawyers' Remuneration Act (RVG) on 1 July 2004. The governing provisions today are Sections 3a et seq. of the RVG.

The form the fee agreement must take

The fee agreement is subject to the formal requirements of Section 3a(1) RVG. Unlike in the past, text form (Section 126b BGB) is now sufficient — the stricter written form with a handwritten signature under Section 126 BGB has no longer been mandatory since the RVG reform of 2008.

Section 3a(1) RVG additionally requires that the agreement

• be designated as a "fee agreement" (Vergütungsvereinbarung) or in a comparable manner,
• be clearly set apart from other agreements — with the exception of the award of the mandate — and
• not be contained in the power of attorney.

The purpose of this provision is to draw the client's attention clearly to the fee agreement and to protect them from unknowingly concluding a fee arrangement that gives the lawyer claims deviating from the statutory fee rules.

A separate paragraph is not enough

Case law does not accept placing the fee provision merely in its own paragraph of the mandate agreement — even if that paragraph is set in bold and highlighted. That does not count as a sufficient distinction from the remaining provisions.

In practice, this means that, in addition to the mandate agreement, a separate fee agreement should be drawn up whose document title clearly identifies it as a provision governing remuneration.

Describe the services concretely

Every fee agreement should set out in detail the activities for which the fee above the statutory remuneration is charged. A reference to the underlying mandate agreement has proven its worth. The more concretely the grounds and scope of the remuneration are stated, the more robust the agreement — for instance where a defective form is later to be cured by an abstract acknowledgment of debt from the client.

What happens if the form requirements are breached?

If the fee agreement breaches the formal requirements of Section 3a(1) RVG, it is not automatically void. Under Section 4b RVG it remains valid in principle — but the lawyer can then claim remuneration only up to the amount of the statutory fee. The portion above the statutory fee cannot be enforced. This is precisely where the commercial risk of a defective agreement lies.

Drafting a sound lawyer contract: checklist

1. Draft mandate conditions transparently — clear, comprehensible and without unreasonable disadvantage to the client (Section 307 BGB).
2. Create the fee agreement separately — not as a mere paragraph within the mandate agreement.
3. Observe text form — the agreement must be at least in text form (Section 3a(1) RVG, Section 126b BGB).
4. Designate and set it apart clearly — title it a "fee agreement", set it clearly apart from other arrangements and keep it out of the power of attorney.
5. Describe the services concretely — state which activities the fee above the statutory rate covers.
6. Rely on current provisions — RVG rather than BRAGO, text form rather than written form.

Frequently asked questions

Does a lawyer's fee agreement require written form?

No. Since the RVG reform of 2008, text form (Section 126b BGB) is sufficient under Section 3a(1) RVG. A handwritten signature, as required for the written form under Section 126 BGB, is no longer mandatory — a documented, durably legible declaration is enough.

What applies today instead of the BRAGO?

The Federal Regulation on Lawyers' Fees (BRAGO) was replaced by the Lawyers' Remuneration Act (RVG) on 1 July 2004. References to Section 3(1) BRAGO are outdated; the relevant provisions today are Sections 3a et seq. of the RVG.

Does the fee agreement have to be a separate document?

The agreement must be clearly set apart from other arrangements. Case law does not regard a mere paragraph within the mandate agreement — even one in bold — as sufficient. In practice, a separate, clearly labelled document is therefore recommended.

What happens if the form requirements are not met?

The agreement does not become void. Under Section 4b RVG it remains valid, but the lawyer can only claim the statutory fee. Any fee agreed above that cannot be enforced.

What determines the validity of general mandate conditions?

The law on standard terms in the BGB — in particular the transparency requirement in Section 307(1) sentence 2 BGB and the prohibition on unreasonable disadvantage in Section 307(2) BGB. Clauses that fail these tests are invalid.