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Costs agreements

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Making a costs agreement

Your client has the right to negotiate the way costs are charged to them by you; and you may make them a written offer as part of a costs agreement.

You can only charge costs that are fair and reasonable for the work involved in the legal matter. Your costs must also be reasonable and proportionate to the work involved.

A costs agreement is a formal agreement between your legal practice and your client covering how you will structure the costs of your work.

Under the Uniform Law you must provide your client with a written costs disclosure (or estimate) if the cost of your professional services is likely to be more than $750 in total. The only exception to this is that a costs disclosure is not required to be given to a commercial or government client. 

A costs agreement is a more detailed legal document. It is enforceable in the same way as a contract. 

A client has the right to ask for a costs agreement if they wish to engage your legal services and you also have the right to require one. 

The Legal Services Council has produced an information sheet on costs agreements which is available on their website.

How can your client accept your offer?

You cannot bill your client if they have not accepted your costs agreement. Some cost agreements can be accepted either in writing or by some other way that clearly indicates they accept it. If you are offering a ‘conditional costs agreement’ (such as no win no fee agreement), this can only be accepted in writing.

There are strict rules around how you must deal with costs agreements. If you don’t follow those rules, the agreement may become void, even if your client has accepted it.

Who can a costs agreement be between?

A costs agreement may be between:

  • your client and your law practice;
  • your client and another law practice that you have engaged on their behalf;
  • your law practice and another law practice that you will do work for your client; or
  • your law practice and a third-party, such as a guarantor or a litigation funder, who will be liable for your client’s legal fees.

Conditional costs agreements

You can put a condition in your cost agreement that you will only be paid for your work if you reach a successful outcome. An example of this is a ‘no win no-fee’ agreement.

These ‘conditional costs agreements’ must be made in writing, and be in plain language. They must include all the conditions that you define as a successful outcome, and they must be accepted in writing or they cannot be enforced.

It is also important to ensure that you explain to your client that you are entitled to charge your legal fees under certain other circumstances where the client does not win their case, such as if you or the client terminates the retainer before the matter has concluded.

If you believe that your client has a good chance of success, you may also include a condition to be paid an ‘uplift fee’. This is an additional payment for a successful outcome, that cannot exceed 25% of the legal costs (excluding disbursements). Your costs agreement must be clear on how the fee will be calculated, what you expect the fee to be, and what factors may change the final fee calculation.

You cannot have a conditional costs agreement in a criminal or a family law matter.

Contingency fees

Victorian law does not currently allow you to bill your client a ‘contingency fee’. This is where your fees are calculated based on how much money you might get for your client from a payout or a settlement. 

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