Fixed fees assume that a client can tell what the legal work is worth to them at the beginning of the representation, which is not always the case. Fixed fees emphasize predictability, but may create problems, such as windfalls for the attorney, which cause clients to shy away. Fixed fees can also be a problem where the client is receiving a windfall because the matter becomes more complicated than expected, but then the incentive for the lawyer is also diminished, so the client's apparent wind fall may actually be costly once the result of the matter is taken into account, if the lawyer chooses to cut too many corners. As experts in their field, lawyers should know better than anyone how to estimate and minimize risks and costs. Because fixed fees shift some of the risk to the lawyer, encourage efficiency, provide predictability and reduce the client's management burden, I recommend them to clients in the right situations, but they are far from perfect.
Averaged fees are the monthly average of hourly fees and a monthly retainer or fixed fee basis.
The fixed fee basis is established as a fixed or lump sum fee would be established, using an estimated or budgeted amount. Normal restrictions on hourly billing, such as staff controls, are also in effect and the client must still manage the hourly component. The firm is thereby encouraged to be more efficient, but if the exigencies of the case take it over budget, it will not be punished with a total write-down of the time. The budget benchmark can be revised as time passes, either to take matter history into account or to anticipate the effect of changes since the last budget. Averaged fees are designed to smooth out the spikes that occur with hourly billing and remove much of the incentive to overstaff or complicate the case that is inherent in hourly billing.