The contract between the organization and the lawyer aims to maximize the collection of the organization’s debts with a minimum of time and costs invested while retaining the customer when possible and cultivating the organization’s image. The goal should be accomplished through comprehensive and full cooperation that will apply to all activities shared by the organization and the lawyer.
Main points for an engagement contract
The contract should detail the engagement process between the organization and the law firm that undertakes the faithful collection of the overdue debt balances of the organization’s clients. The contract should encompass all financial, operational, administrative, technical and administrative aspects of the joint work. It should also describe when the organization will be entitled to change the contract, the method of engagement and the remuneration of the lawyers in the future.
Below are the main clauses of the agreement that we recommend:
Reducing the organization’s exposure to contract cancellation costs
In some cases, conflicts and various problems arise that can lead to the termination of the engagement with the lawyer, stopping the transfer of new cases to him and a request to transfer back the old cases with all their relevant documents to the organization. Sometimes, the lawyers ask to receive for these cases a fee for their work, compensation for future loss of income, compensation for damage to reputation, etc. In many cases, these amounts make the process of returning the cases unprofitable. To reduce exposure to such a risk, a clause must be included in the engagement agreement that will allow the organization to receive the files back at a minimal financial cost.
The fact that we put this close first is not innocent. Cooperations with lawyers tend to end in the long run. After a few years of work, lawyers tend to focus more on new business to the detriment of existing clients. Therefore, terminating the agreement and calling back the collection’s portfolio is not a rare event. It always leads to friction; therefore, the termination option must be planned and prepared carefully.
Technical specifications
The technical specification summarizes the basic and necessary conditions for the organization to start working with the lawyer. It should include the technical aspects of data processing necessary for the organization, including computers, operating systems, methods of communication between the organization and the lawyer, management software for the lawyer, and adapting the software to the interface with the organization.
Level of service and telephone support
The lawyer’s office will guarantee a level of service to clients in legal proceedings in accordance with the organization’s client retention policy. The service should include a regular telephone response to the organization’s clients (at agreed-upon hours between the organization and the law firm) and the proper treatment of customer inquiries and inquiries of the organization’s representatives. Defining response times to customers and organization representatives as well.
Trial Period
The contract between the organization and the lawyer will be signed for a trial period, during which cases will be transferred to the lawyer’s office – in a defined number and amount of money on a schedule decided in advance – according to the organization’s decision. During this period, the organization will examine the quality, pace, and efficiency of the lawyer’s activity, including the evaluation of the cooperation between the organization and the office, the collection efficiency (the rate of collection from the total debt transferred), and supervision of the collection of expenses. In addition, the organization will examine the degree of cooperation regarding communication availability, data flow, response time of the lawyer to the organization’s inquiries, customer impact and other factors.
Professional liability, limits of liability and compensation
The contract with the lawyer will include, among other things, a commitment that:
- The lawyer and his employees have all the necessary licenses and permits to carry out and implement the agreement with the organization.
- The lawyer will bear any damage or loss caused to the organization due to his or his employees’ professional negligence.
- The lawyer will be responsible for any damage or loss caused to the organization’s property, including damage to debtors’ balances due to his or his employees’ acts or omissions.
- The lawyer will purchase at his own expense a professional liability insurance policy in an amount agreed by the organization.
The lawyer’s commitment to maintain confidentiality and other documents.
The lawyer will sign a non-disclosure agreement covering all his employees, in which they undertake to maintain oral and written confidentiality, including documents and client information. This is intended to protect the organization if the lawyer or one of his employees makes illegal use of the customers’ details and their methods of payment or any other information that comes to his knowledge or to the knowledge of one of his employees.
Termination of activity with the lawyer
When the organization or the external lawyer decides to terminate the engagement, several problems may arise regarding:
- Cases that are already in the stages of prosecution;
- Cases that are with the lawyer, but a lawsuit has not yet been filed regarding them.
- Cases that have been with the lawyer for a long time and have little chance of collection, but the lawyer has not yet recommended their deletion.
- Fees for the work already invested in the cases that the organization decided to withdraw – when the organization decides on this unilaterally.
The engagement contract must provide maximum protection for the organization in these important matters:
- The organization should be able to terminate the lawyer’s activity unilaterally according to predetermined advance notice.
- The organization should be able to decide which cases it leaves with the lawyer and which cases it withdraws.
- It should be clear that no fee is due for the work invested in the cases that the organization withdraws, since the decision to return them unilaterally indicates that the organization is not satisfied with the lawyer’s work.
- The agreement must also restrict the lawyer from transferring in any way a right or obligation according to the agreement to a third party without the prior written consent of the organization. This is to prevent the lawyer from sub-outsourcing the contract.
Work procedures and annexes to the contract
The work procedures and the appendices to the contract should include, among other things, reference to the following issues:
- The process by which the organization will transfer customer debt balances to legal treatment.
- The customers’ details that will be transmitted through the computerized or manual interface, including the customer’s name, customer number, ID card, etc.
- The lawyer’s responsibility is to check the correctness and completeness of the data in a full kit upon reception.
- The lawyer’s responsibility is to start handling the client’s case immediately.
- The content of warning letters.
- Threshold conditions and procedures for continued treatment and escalation, while checking economic viability at each stage.
- Conditions and procedures for filing a claim.
- Conditions and procedures for dealing with companies in liquidation or insolvency.
- Terms and procedures for contracting with investigation and tracing companies.
- Conditions and procedures for transferring receipts and accounting.
- The process of transferring the funds from the attorney’s office to the organization through the trust account.
- The organization’s support practices to the law firm (professional support and training of the organization, including response schedules).
- Interfaces (APIs) between the organization and the lawyers. All the processes in this matter will be defined in accordance with the capabilities of the organization and the lawyer. The issue is of great importance in the information system and in the communication system between the organization and the lawyers.
- Authority procedure for arrangements, settlements, and discounts.
- Procedure for closing cases after collection, write-off or because of the organization’s decision to withdraw the case.
- Procedure for dealing with bad debts, including approval by the lawyer and action schedules.
- Table of approved rates and expenses.
- Expense payments that will be applied to the clients as part of fees paid to the attorney such as collection via credit cards, etc.
- Example of a statement of claim and other legal forms templates.
- Standing order.
- Payment voucher example.
- Conditions and procedures for recommending bad debts to be written off.
- Case closure form.
- Agreement for the provision of services by the organization, if necessary.
- Frequency of transfer of cases from the organization to a lawyer on a timeline.
- The way the data is received by the lawyer – electronic/manual.
- A schedule for legal proceedings.
- Terms and procedures for contacting the organization in case of misunderstanding, incorrect data, missing information and unclear information.