Bartering Legal Services

Our friends at Wikipedia tell us that bartering is

“… A method of exchange by which goods or services are directly exchanged for other goods or services without using a medium of exchange, such as money.[1] It is usually bilateral, but may be multilateral, and usually exists parallel to monetary systems in most developed countries, though to a very limited extent. Barter usually replaces money as the method of exchange in times of monetary crisis, such as when the currency may be either unstable (e.g., hyperinflation or deflationary spiral) or simply unavailable for conducting commerce.”

For a lawyer, bartering might consist of swapping services with someone like a Web designer. In exchange for setting up a business entity, you receive a fresh, new Web site.

What are the Implications of an In-Kind Transaction? 

When a lawyer accepts in-kind payment for legal services, whether the payment consists of the client providing services to the lawyer or an ownership interest in the client’s business, the lawyer is going beyond simply establishing a contract for legal services, and instead is doing business with a client. When entering into a business transaction with a client, lawyers must follow the requirements of RPC 1.8(a).  [Excerpted from Alternative Pricing Models: What’s in a Fee?]

This means:

  • The terms of the agreement must be reasonable and fair.
  • Your fee agreement must be in writing.
  • You must obtain the informed consent of your client to proceed (usually contained within the fee agreement).
  • You must recommend that the client consult with another attorney in deciding whether consent should be given.
  • You must fully disclose the details of the business transaction and each party’s role (part of informed consent).
  • You must forward a copy of the signed disclosure and consent to the Professional Liability Fund within 10 calendar days of execution or any legal malpractice claim based on or arising out of the transaction will not be covered.  [If providing a copy of the signed disclosure and consent would violate the rules protecting a client’s confidences and secrets, an “alternative letter” may be provided.  See Section V of the plan, “Exclusions from Coverage, Exclusion No. 8.  A sample disclosure and consent letter is included in the plan and is also available as a separate practice aid on the PLF Web site.  Select Practice Aids and Forms under Loss Prevention, then Conflicts of Interest.]

Beyond the Obvious Ethical Traps and Liability Exposure

Barter exchanges also have practical implications.  Ask yourself:

If you plan to barter with a client in exchange for legal services, go into the arrangement with your eyes open.

  1. Read Alternative Pricing Models: What’s in a Fee? by Helen Hierschbiel.
  2. Obtain a copy of “Disclosure Form ORPC 1: Lawyer Engages in Business Transaction with Client” and use it!  (Available on the PLF Web site > Practice Aids and Forms > Conflicts of Interest.)  If you are reading this post, but your practice is located outside of Oregon, please contact your professional liability carrier about possible exclusions from coverage and read the next point.
  3. Understand how your professional liability coverage works.  The Primary and Excess Plans are posted on the PLF Web site.  Call the PLF with coverage questions: 530-639-6911 or 800-452-1639 (Toll-Free in Oregon.)
  4. If you’re still foggy on the ethics, contact Oregon State Bar General Counsel.
  5. If you need help with tax-related recordkeeping and reporting, speak with your accountant or a tax lawyer.
  6. Learn the ins and outs of bartering – if you are trading legal services for a new Web site, verify that your potential client can do the job.  Check out BarterQuest – an informative collection of posts on when, where, and how to barter.

Nothing prohibits bartering with a client for legal services, but like so many alternative fee approaches, be sure you know what you are doing before you enter into an agreement you might regret.

Copyright 2011 Beverly Michaelis

2 thoughts on “Bartering Legal Services

  1. Thanks for the detailed description! I started using BarterQuest, looks like you can get pretty much anything on there.

  2. Pingback: Avoiding eCourt – Waivers and eFiling “Lawyer Buddies” | Oregon Law Practice Management

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