Attorney’s fees: bgh rulings on formal errors in compensation agreement

Introduction
The Federal Court of Justice has issued several important rulings on attorney’s fees in recent years. The primary issue was formal errors in the compensation agreement between lawyer and client. The focus was particularly on the questions of what is required of such an agreement and what the consequences are if it is incorrectly drafted. This article summarizes the relevant BGH decisions and explains their implications for practice.
Errors in the remuneration agreement
The agreement on the attorney’s fee is an important part of the mandate contract. It regulates the amount of remuneration that the lawyer receives for his work. However, certain requirements must be met when drafting the agreement. Otherwise, there may be formal errors that have a negative impact on the effectiveness of the agreement. The most common errors include unclear wording or missing information on the amount of the fee.
Case Law of the BGH
In recent years, the Federal Court of Justice has ruled on various aspects of the remuneration agreement. In doing so, it has formulated clear guidelines as to what must be observed when drafting the agreement. In particular, it has emphasized that a clear and understandable wording of the agreement is necessary to enable the client to make an informed decision. In addition, the court ruled that it is mandatory to specify the specific amount of the fee and that a reference to the attorney’s fee schedule is not sufficient. Another important ruling concerns the case that an agreement is faulty: In such a case, the lawyer may only demand an appropriate fee calculated on the basis of the actual time spent.
These and other aspects are explained in more detail below.

Attorney’s fee: Current BGH rulings on formal errors in the remuneration agreement

Lawyers are obliged to charge their clients an appropriate fee. The amount of the fee depends on various factors, such as the difficulty of the case, the scope of the lawyer’s work or the importance of the matter for the client. As a rule, a remuneration agreement between the lawyer and the client is necessary for the agreement of the fee. But what happens if there are formal errors in this agreement?

The Federal Court of Justice (BGH) has ruled in several judgments that formal errors in the remuneration agreement can lead to a loss of the fee claim. For example, if the fee is insufficiently specific, if the amount is inappropriate, or if the lawyer fails to comply with his transparency obligations, the client may not have to pay the fee. Even an impermissible clause in the agreement can result in the lawyer losing his fee claim.

It is therefore important for attorneys to proceed with particular care when drawing up remuneration agreements. You should ensure that all requirements of the law are met and that the agreement is understandable and comprehensible for the client. If in doubt, the lawyer should also seek a second opinion to ensure that the agreement meets the requirements of the law and does not contain any formal errors.

• Conclusion:
• Formal errors in the remuneration agreement can lead to the lawyer losing his entitlement to a fee.
• Lawyers should proceed with particular care when drafting agreements.
• In case of doubt, a second opinion should be sought.

Summary of the BGH rulings on formal errors in the remuneration agreement for attorneys’ fees

In recent years, the case law of the Federal Court of Justice (BGH) has repeatedly dealt with the question of the extent to which formal errors in remuneration agreements between attorneys and clients can have an impact on the amount of the attorney’s fee. Here, it was examined in particular whether formal errors in the agreement can justify a determination according to the principles of equity.

An important aspect in the assessment of formal errors in remuneration agreements is the question of whether these errors disadvantage the client or whether compensation is provided. The Federal Court of Justice (BGH) has made it clear that the parties to a remuneration agreement are generally free to draft it as they wish and that formal defects do not necessarily mean that the agreement is invalid. Rather, it always depends on the individual case.

Another important point concerns the transparency of the remuneration agreement. In the opinion of the BGH, the agreement must be drafted in a clear and comprehensible manner so that the client can actually recognize the scope of the agreement. If certain aspects are not made sufficiently clear, this can lead in individual cases to the remuneration agreement being invalid or to the lawyer only having a limited claim to a fee.

In view of the large number of different constellations and court decisions in this area, it is difficult overall to form a generally valid summary of the BGH rulings. A careful examination of the respective remuneration agreement and the circumstances of the specific case is therefore essential in order to make the right decision.

Legal consequences of faulty remuneration agreements

The legal consequences of void or incorrectly agreed attorney’s fees have been the subject of several decisions of the Federal Supreme Court for several years now. The question at issue is what consequences a defective or incomplete remuneration agreement has on the validity of the entire contract.

In principle, the following applies: If an agreement on the attorney’s fee violates a statutory regulation or offends common decency, this agreement is null and void. Consequently, the entire contract is also invalid if the invalidity of the fee agreement characterizes the contractual relationship as a whole.

In its ruling of 13.07.2017 (Az. However, in its decision IX ZR 217/16), the BGH also clarified that an invalid remuneration agreement does not necessarily call into question the validity of the entire agreement. Here, it always depends on the individual case, in particular whether the fee agreement is of central importance to the contract or whether the contract can be meaningful even without an effective fee agreement.

In case of doubt, the client and the lawyer should therefore always agree on a comprehensive and complete remuneration agreement, keeping in mind the applicable legal regulations and the current decisions of the Federal Supreme Court (BGH).

Avoiding mistakes with attorney’s fees: tips from the BGH

When it comes to attorney fees, it is important to have a clear and understandable compensation agreement. However, it can happen that formal errors are made when drawing up this agreement, which can subsequently lead to conflicts between lawyer and client.

The highest German court, the Federal Court of Justice, has emphasized the importance of the correct form of the agreement in several rulings. For example, it has been found that incorrect information regarding the amount of the fee or the payment terms can result in the entire agreement being null and void.

In order to prevent such formal errors, it is advisable to formulate a clear and comprehensible list of the agreed services and fee. A detailed explanation of the payment terms is also advisable.

If, despite all caution, there are formal errors in the agreement, it is advisable to correct them as soon as possible and to make a new, error-free agreement. Eye-to-eye communication between lawyer and client can help avoid conflicts and find a satisfactory solution for both sides.

• Summary:
• – A clear and comprehensible remuneration agreement is essential when it comes to attorney’s fees.
• – Formal errors in the agreement can lead to nullity and cause conflicts.
• – To avoid formal errors, it is advisable to formulate the services and the fee clearly.
• – In the event of formal errors, a correction should be made quickly and a new agreement reached.

Conclusion

The decisions of the Federal Court of Justice on formal errors in lawyers’ remuneration agreements have consequences for the entire industry. It has become clear that care must be taken when drawing up contracts in order to avoid legal difficulties.

In particular, failure to specify the hourly rate can have a major impact on remuneration. Lawyers should therefore take care to include all required information in detail and not leave any gaps in the agreement.

It remains to be seen how these rulings will affect future contracts and whether other courts will make similar decisions. In any case, attorneys should carefully review all terms in their contracts and adjust them if necessary to avoid legal problems.

• Care in drawing up the agreement is crucial in order to avoid difficulties.
• Missing information can have a major impact on remuneration.
• Attorneys should review contracts closely and make adjustments as necessary.