Small Errors Can Lead to Big Problems

When obtaining signatures from clients on fee agreements or engagement letters, an attorney must not overlook the necessity of signing the document themselves.

In a recent case, the Texas Court of Appeals refused to enforce an arbitration agreement where the clients had signed the fee agreement, but the law firm had not. The Court stated that the lack of a signature does not, by itself, make the arbitration clause unenforceable. However, because the agreement lacked the law firm’s signature, the Court was compelled to look to the conduct of the parties to determine whether the clause was enforceable. The Court stated that the law firm "did not sign the fee agreement and the blank for indicating its date of execution is unfilled. There is no evidence that the firm performed under the fee agreement. Nor is there evidence showing that the firm otherwise intended to be bound by the fee agreement.”

The law firm provided the clients a fee agreement to sign, then several months later informed the clients that they would be unable to proceed with the representation. And while the law firm maintained that before ending the representation the firm evaluated the client’s claim, the court found that the record was devoid of any evidence showing that that firm made a pre-suit evaluation. The Court stated that this lack of evidence of contract formation was “fatal to its suit to compel arbitration.”

It is impossible to predict whether this case would have been brought and how the court would have ruled had the fee agreement been signed by the firm. However, it is likely that signature by the law firm would have lessened or diminished the need of the court to look at the conduct of the parties when deciding on enforceability of the arbitration clause. This seemingly small error left the firm to face a malpractice suit without the protections they had set forth in the fee agreement.