Fixed-fee agreements should be matched by the law firm’s rights to influence business practices

Whenever a law firm agrees to a fee to handle all the work of a defined kind for a set period, what is known as a fixed-fee agreement, that firm should be granted a corresponding ability to influence what the company does that triggers the work. The firm should be permitted, indeed encouraged, to educate clients, improve procedures, alter settings, make available tools, or otherwise have the company take steps to reduce the flow of those kinds of matters.

Otherwise, the firm could be at the mercy of a perverse incentive: “Hey, who cares what happens, since XYZ firm has committed to take care of it for a set price.” The moral hazard that accompanies all free goods and services becomes obvious.

If the firm can train store managers, intervene on the quality assurance steps, suggest better ways for complaints to be handled, or all such improvements without over-reaching management’s prerogatives and responsibilities, then those rights better align the fairness of the economic arrangement.

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