Collars to prevent either side from being bitten by fixed fees

A good practice for law departments that negotiate with their law firms a fixed fee for handling certain work is to protect both sides with a collar. A typical collar might agree that if the actual fees of the law firm are more than 15 percent above the fixed-fee payment, the law department will absorb 50 percent of the excess. On the other side, if the actual fees come in 15 percent or more below the fixed fee, the law firm will rebate 50 percent.

By protections such as these collars, and their infinite permutations, both sides feel more comfortable that if the actual workload varies significantly from the projected workload, they will avoid rank injustice. To not be dogged by unfairness unleash collars.

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