Flat fee engagement letter: what the fixed price covers and when it is earned
By Arthur Teboul, DokuTrak · Published
In brief
A flat fee engagement letter states one price for a described piece of work, lists what that price covers and what it does not, and sets the milestones at which parts of the fee are earned. Those milestones set where prepaid money sits and how much comes back if the client ends early.
The template: Flat fee engagement letter
Fill the scope lists and the milestone schedule first, then the price. The trust account clauses are for law firms: keep the operating-account clause only if your state allows it and you make the disclosures it requires. Not legal advice: check your state rules.
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Fill it in online: The engagement letter generator fills this template with your firm and client, keeps the optional clauses you pick, and gives you the letter to copy, print or save.
[Firm name] [Firm address] [Date] [Client name] [Client address] Re: Flat fee for [matter or service]
Dear [Client name],
The work and the price
We will [describe the matter or service] for a flat fee of [amount]. This fee pays for the work listed in the next clause, however much time it takes us.
Included in the flat fee
The flat fee covers: [task 1]; [task 2]; [task 3]; and [deliverable]. It assumes [key assumptions, for example one entity, no more than (number) transactions a month, an uncontested matter].
Not included
The flat fee does not cover: [exclusion 1]; [exclusion 2]; or any work made necessary by facts that differ from the assumptions above. We will quote that work before starting it, as a new fixed price or at [rate] per hour.
Costs
Third-party costs, such as [filing fees, expert fees, appraisals], are [included in the flat fee / billed to you at cost as they arise].
When the fee is earned
The fee is earned in stages: [percentage] when [milestone 1]; [percentage] when [milestone 2]; and the balance when [completion]. We will tell you in writing when each milestone is reached.
For law firms: where prepaid fees are held(optional)
Any part of the fee you pay before it is earned will be held in our client trust account and moved to our operating account as each milestone is reached.
Operating account option(optional)
You have the right to require that the flat fee be held in a trust account until it is earned, and you are entitled to a refund of any part not earned if the engagement ends early or the work is not completed. By signing here, you agree that we may deposit the fee in our operating account instead: ____________________.
If the engagement ends early
Either of us may end this engagement in writing. You will owe the milestones already reached, plus the value of work done toward the next one at [rate] per hour, but never more than the flat fee. We will refund the rest within [number] days.
Changes in scope
If new facts change the work, such as [added parties, a contested hearing, a new entity, volume above the limit], we will send you a written amendment with the new fee. We will not start the added work until you sign it.
What we need from you
You will send us [documents and information] by [date] and respond to our questions within [number] business days. Delays on your side may move our delivery dates; they do not change the fee unless the scope changes.
Payment
You will pay [all of the fee on signing / (amount) on signing and (amount) at each milestone]. If a payment is more than [number] days late, we may pause the work after written notice.
Fee disputes(optional)
If we disagree about the fee or a refund, we will first try to settle it directly. [If your state bar runs a fee arbitration program, we will tell you about it in writing before any other step.] This letter is governed by the laws of [state].
Monthly package terms(optional)
For a monthly fixed-fee package, the fee of [amount] is billed on the [day] of each month and covers the services listed above for that month only. We will review the price each [month] and give you [number] days’ notice of any change.
Signature
Please sign below to agree to this flat fee and its scope, and return a copy to us with the first payment.
Sincerely, [Professional name], [Title] [Firm name] Signature: ____________________ Date: __________ Client: [Client name] Signature: ____________________ Date: __________
What a flat fee buys
A flat fee is a fixed amount that pays in full for described services, whatever the work ends up taking. That is close to how California’s rule defines it, and the rule allows it to be paid in whole or in part in advance (California Rules of Professional Conduct, Rule 1.5, Fees for Legal Services (with executive summary)).
The key word is “described”. A flat fee is only as safe as the list behind it. If the scope says “divorce, uncontested” or “2026 individual return with up to two rental properties”, both sides know what the price buys. If it says “legal services” or “tax work”, every surprise becomes an argument.
Clients like flat fees because they cap the bill. You like them because they reward speed. The letter makes that trade work by stating the assumptions the price rests on, such as the number of entities, parties, hearings or transactions.
Scope in, scope out
Write the scope as two lists side by side. Anything not on the left is billed separately, at an hourly rate or a new fixed price. The examples below mix a legal and an accounting engagement to show the pattern.
| Covered by the flat fee | Not covered, billed separately |
|---|---|
| Drafting and filing the uncontested petition | Any contested hearing or trial |
| One round of revisions to the settlement terms | Added parties or new claims |
| Preparing one federal and one state return | Returns for other states or years |
| Up to [number] bank and card accounts each month | Clean-up of months before the start date |
| Court filing fees, if stated as included | Expert, appraiser and court reporter fees, unless included |
Milestones: when each part of the fee is earned
A prepaid flat fee is not earned the moment it arrives. California’s comment to its fee rule points to the trust account rule for fees paid in advance (California Rules of Professional Conduct, Rule 1.5, Fees for Legal Services (with executive summary)). That rule lets a lawyer put a prepaid flat fee in the operating account only after telling the client in writing that it may be held in trust until earned and that unearned amounts are refunded (California Rules of Professional Conduct, Rule 1.15, Safekeeping Funds and Property). If the flat fee exceeds $1,000, the client must sign that agreement (California Rules of Professional Conduct, Rule 1.15, Safekeeping Funds and Property). Your state may instead require an advance flat fee to stay in trust until it is earned, so do not assume California’s operating-account option applies to you.
A milestone schedule is the list of points in the work at which a stated share of the fee becomes earned. It turns a vague question into a lookup. For example, split the fee into three stated shares, one for each milestone. If the client ends the work after the first milestone, the first share is earned and the other two are refunded.
Pick milestones the client can see, such as a filed document, a delivered draft or a closed month. Avoid internal steps like “research complete”, which the client cannot check.
Nonrefundable labels and early termination
A flat fee pays for work, so it is not a true retainer, and California allows the “nonrefundable” label only for a true retainer (California Rules of Professional Conduct, Rule 1.5, Fees for Legal Services (with executive summary)). The retainer engagement letter covers that label and the trust rules in more detail.
When an engagement ends early, the lawyer must promptly refund any part of a fee paid in advance that has not been earned (California Rules of Professional Conduct, Rule 1.16, Declining or Terminating Representation). Your letter should say how the earned part is measured: by milestones reached, and, between milestones, by the value of the work done at your hourly rate, capped at the flat fee.
Fixed-fee packages for accountants and bookkeepers
Accounting firms sell flat fees as monthly packages more often than one-off prices. A scope trigger is a change in the client’s facts that moves the work out of the package, such as a new entity, a second payroll, or transaction volume above the stated limit. List the triggers in the letter and say that each one prompts a written price change.
Review the price once a year on a fixed date. Say what the client must send each month and by when, and that late records shift your delivery date, not your fee. Then the package stays fixed for the work you priced, and only for that work.
Questions people ask
What is a flat fee engagement letter?
It is an engagement letter that sets one fixed price for described services, lists what the price covers and excludes, and says when the fee is earned and what is refunded if the work ends early.
Can a flat fee be nonrefundable?
Usually not. California allows a fee to be called nonrefundable only if it is a true retainer paid for availability and the client agrees in writing (California Rules of Professional Conduct, Rule 1.5, Fees for Legal Services (with executive summary)). A flat fee pays for work, and unearned parts are refunded (California Rules of Professional Conduct, Rule 1.16, Declining or Terminating Representation).
Can a flat fee go straight into the operating account?
In California, yes, if the lawyer discloses in writing the client’s right to have it held in trust and to a refund of unearned amounts; above $1,000 the client must sign that writing (California Rules of Professional Conduct, Rule 1.15, Safekeeping Funds and Property). Other states differ.
What triggers an extra fee on a flat fee engagement?
Anything outside the listed scope or the stated assumptions, such as a contested hearing, an added party, another state return or volume above the stated limit. The letter should require a written amendment before extra work starts.
Sources
- California Rules of Professional Conduct, Rule 1.5, Fees for Legal Services (with executive summary): A flat fee is a fixed amount that pays in full for described services and may be paid in advance; a nonrefundable label is allowed only for a true retainer with written agreement.
- California Rules of Professional Conduct, Rule 1.15, Safekeeping Funds and Property: A prepaid flat fee may go into the operating account after written disclosures, with a client-signed writing if it exceeds $1,000.
- California Rules of Professional Conduct, Rule 1.16, Declining or Terminating Representation: On termination, the lawyer promptly refunds any part of a fee paid in advance that has not been earned.
About the author
Arthur Teboul (Founder, DokuTrak) is building DokuTrak after watching professionals lose hours chasing clients for documents over email. Arthur Teboul.
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How this page was made (methodology): it is built from the primary sources listed under Sources, and every rule and figure on it links to the source it comes from. Last updated October 25, 2026. Spotted an error or a rule that changed? Contact us.
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