Contract for Services and Retainer Agreements: Establishing Ground Rules for Investigators and Clients
Contracts are crucial in the private investigation business. Never accept an assignment without having one in place! The only exception I make to this rule is with attorney-clients, who will probably not sign one anyway, and a trusted few other private investigations agencies; instead I have them sign a “Letter of Engagement.”
Why is a contract necessary?
First, you want to get paid for your work! A well-written contract for services or retainer agreement spells out terms of work and billing rate, and it specifies how payment will be made.
If a client balks at your invoice, then you have evidence of the agreement that hopefully will stand up in court should in case of non-payment and breach of contract. There are penalties for not paying and/or trying to reverse the charges on the credit card used to pay for services as well.
Bottom line, a contract for services or retainer agreement maximizes an investigator’s protection in the event of a client dispute. Other client problems such as misunderstandings, refunds, complaints, or clients threatening to sue, can easily be avoided or defended with a properly drafted and executed contract or retainer agreement.
Secondly, I use contracts to manage client expectations rather than to absolve or indemnify our company of any perceived liability which may arise from our investigation. Very few “retail” clients have a realistic understanding of the investigative process and what they can or cannot expect; this isn’t CSI Miami or Magnum PI, and the end result of any investigation may be less than dramatic and not what the client had expected. A great contract diffuses unrealistic expectations and helps to prevent “buyer’s remorse” when an investigation doesn’t turn up hoped-for slam-dunk evidence of an affair.
Lastly (and I say this both seriously and with a measure of humor): Sometimes the difference between stalking and surveillance is a contract.
Here’s what I mean: if the subject of your investigation calls the police, the responding officers are going to want a good explanation for why you have been “harassing” the complainant. A crime of stalking or harassment requires the intent to create distress in the victim, and evidence that you are a disinterested professional diligently working on behalf of a third party could go a long way in sorting out the mess before it lands you in jail.
The Anatomy of a Contract for Services or Retainer Agreement
A properly drafted contract for services or retainer agreement must encompass every aspect of the contract. The formalized agreement should clearly state what each party expects of the other, who is involved, the scope of services, and what to do if one party fails to live up to his end of the bargain.
Here are some very important elements that should be addressed in any contract for service or retainer agreement:
Be Clear and Straightforward.
Your retainer should be well-drafted, ethically sound, and written in simple, understandable language. By this I mean avoid using so much “legalese” that you scare away a new client. No one will sign a ten-page retainer agreement. Keep it to two or three pages, maximum, or it will become too onerous and intimidating to a client who’s probably already apprehensive about retaining a private investigator in the first place! The last thing you want to do is to lose a client after you’ve gotten him this far.
Include a statement of who you are doing the work for by identifying the parties involved in the contractual agreement such as “Agency” and “Client.”
Identifying the client may seem straightforward, but sometimes it isn’t. Who is going to pay the bill? If an attorney is hiring you on behalf of a client, I recommend the agreement be in the attorney’s name. If the client is a corporation, I recommend listing the officer/director of the corporation that is authorized to make payments and decisions on behalf of the company. If a third party is going to pay the bill on behalf of the client, include the grantor’s name and a place for his signature within the contract.
Date and Location
Include the date the contract commenced and where the investigation is being conducted.
Scope of Services
Include a detailed description of the assignment and scope of the work to be completed by the investigator in your contract. A detailed and clearly defined scope of services, written into the contract and communicated to the client, helps investigators stick to the services they promised to provide and understand the client’s objective of the investigation.
Include a brief statement of the client’s intent of the investigation or why they want the investigation conducted. Mapping out what the client intends to do with the information you obtain during the investigation will reduce an investigator’s liability in the event of a client dispute or a client’s misuse of the information obtained during the investigation.
One more important hint:
If I know that I am going to have to obtain information from my database provider to get the job done, I will always try to closely match some portion of the description of the purpose of the investigation to a “GLBA Permissible Purpose” which the data broker will have me certify prior to obtaining the information.
For example, I might write the explanation of the investigation like this:
“The client is employing the services of the agency in order to conduct surveillance upon John Smith (subject) in an effort to determine the extent of the subject’s injuries as it relates to a potential legal liability claim against the the client.”
“The client is employing the services of the agency in order to find John Smith (subject) in an effort to perfect a properly authorized legal subpoena issued by a civil court having jurisdiction over matters in litigation involving the subject.”
“The client is employing the services of the agency in order to conduct a complete background investigation and surveillance upon John Smith (subject) in an effort to identify the source of unauthorized transactions and prevent potential fraud causing significant financial losses to the client’s business.”
When explaining the scope of services rendered, remember to set realistic expectations.How do you keep clients from developing unrealistic expectations to begin with? Part of the answer is finding out what the client’s goal or objective is before the assignment even begins.
Payment Terms and Fees
The payment terms and fee section of the contract should establish the investigator or agency’s fee schedule. If you require a retainer up front, document the amount of the initial retainer that you are collecting. Indicate how many hours of investigative time the client has initially agreed upon with you.
Our agency typically collects the entire estimated case hours up front in the form of a retainer. I find that it is much easier to give money back than to collect it later.
In the fee section of the agreement the following information should be documented:
- The investigator(s) assigned to the case;
- Your hourly rate, if you bill at a flat rate include amount;
- A statement regarding the exhaustion of the retainer amount in the event you feel you are going to exceed the retainer amount, what expenses will be reimbursed if there are unused retainer proceeds, and when and how it will be refunded;
- A statement regarding payment methods; if the client is paying by credit card have them sign a credit card authorization form;
- The policy concerning past due invoices, late fees and attorney fees; include finance charges if applicable;
- Rates or fees for court appearances, expert testimony, or depositions;
- Rates for any additional services or expenses that may be needed during the course of the investigation and are not included in the specified investigation, such as skip tracing, GPS or additional equipment expenses, hotel charges, meal charges database charges, etc.
A final investigative report documents the work conducted by the investigator during the investigation. Clearly state your reporting methods in your agreement. Will you be reporting to the client verbally? Will she receive a written report? When do you send a report or update the client on their case? Include a statement in this clause explaining that when all unpaid charges have been paid, the investigator will release and deliver all reports to client.
Communication with the client
Failures in communication are the most common source of friction in investigator-client relationships. The communication clause in my contract states the following:
- Investigator will keep the client reasonably informed about the status of a matter.
- Investigator will promptly comply with reasonable requests for information from the client.
- Investigator will provide client with adequate information to participate judiciously in decisions concerning the objectives of the investigation.
Note: Investigators should discuss the method of communication that would be most appropriate and effective with the client. Do you want to communicate by phone? Email? Is texting appropriate? How about old-fashioned letter writing? When determining the most effective form of communication with your client, make sure you comply with other ethical considerations related to confidentiality.
Even the best investigators cannot always guarantee the results or outcome of an investigation. There are always unforeseen factors involved. Again, it’s important to establish realistic expectations with your client early on.
Provide a non-guarantee statement in your agreement saying that you will do your very best to collect the facts they are looking for but that there is no guarantee you will obtain the exact results they desire.
A termination clause is obviously the portion of a contract that explains the rights of the parties to terminate, or cancel the contract.
When including a termination clause in your contract clearly outline the following for your client:
- Circumstances of termination: Cover all instances that could activate the termination clause in your contract (including but not limited to, default in payments, conflict of interest, or other events constituting a breach of contract).
- Notice of termination: Include a clause containing instructions as to how the parties involved should end the contract. These instructions can include time frames and notification methods.
Limitation of Liability
This clause is often inserted into a contract to exclude or limit your liability for breach of contract or negligence. The willingness of courts to enforce the limitation of liability clause varies from state to state. The limitation of liability contract clause should be relied upon with the understanding that that the court may void the clause. I recommend having an attorney review this clause before inserting it into the contract.
Information is confidential if others do not have a right to receive it. Clients entrust investigators with conducting their investigations, therefore a confidentiality clause in your contract is absolutely crucial. It is an investigator’s ethical obligation to maintain strict confidentiality to all information that relates to the representation of a client.
Declaration of Licensing
Provide your agency or private investigator license number in the contract. In addition, provide contact information for your state licensing authority. In the event that an investigator is involved in unlawful activities or misconduct, the client should have the information available to report such conduct.
Acceptance of Terms
This clause simply states that the agreement is binding and that by signing this agreement, the client certifies he/she has thoroughly examined and fully understands the agreement. I have seen some contracts include language in the statement of terms that faxed, emailed or otherwise copied agreements carry the same weight and validity as an original document.
Signature Lines and Initial Boxes
Provide date of agreement, client signature, printed name, contact information for client, and the investigator’s signature.
In addition, your contract should contain acknowledgement boxes (a box where the client puts their initials) These acknowledgment boxes should be placed next to any clauses particularly referring to fees and credit card payments. This will help alleviate client disputes on fees and charges.
Disclaimers and Addendums
A disclaimer is generally any statement intended to specify or limit the scope of rights and obligations that may be exercised and enforced by parties in a legally-recognized relationship. An addendum is used to add, correct or modify one or more of the terms of a written agreement, without changing the remaining terms.
Here are a few examples:
Protection Orders and Restraining Orders
As an added protection, we inserted the following disclaimer to our agreement:
CLIENT must certify (by initials) each of the following statements:
- There is no restraining order or protection order against me (CLIENT) for this individual. ______
- There has never been a charge of stalking or aggravated stalking against me (CLIENT)._______
Missing Person Investigations
Certain disclaimers and addendums are essential when it comes to missing person investigations and background investigations.
All clients with requests to locate missing persons which are not business-related or associated with legal action are thoroughly vetted prior to accepting the assignment. We have the duty and ethical obligation to maintain a subject’s safety after finding him and will take appropriate measures to ensure that this happens. Here is a copy of the “Subject’s Right of Refusal” clause we add to our retainer agreement when applicable:
“If this investigation is an attempt to locate a person (family member, adoption, reunion, former family member, friend or significant other), for a non-commercial purpose that does not fall with permissible purpose guidelines of the Fair Credit Reporting Act, I understand I will not receive the subject’s whereabouts or personal information until they have signed a waiver authorizing the release of this information to me. In the event that the subject declines the release of his or her information, you authorize CompassPoint Investigations to release your home address, email address, telephone number or other contact information to the subject for the purpose of contacting you directly. In any case, I understand that I will still be liable for the cost of the investigation conducted whether the subject authorizes the release of their information or not.”
We come across many requests for background investigations and due diligence assignments that will eventually rely upon information developed solely from commercial database searches; the collection and veracity of this information are outside of our control. We add the following disclaimer to our retainer agreement when we will be including information from databases that we do not have the time or budget to verify first hand:
“The data provided in the final investigative report may be derived from third-party commercial databases and information aggregation services and will be specifically identified as provided by a third-party. As a result, CompassPoint Investigations cannot warrant the comprehensiveness, completeness, accuracy, or adequacy for any particular use or purpose of the information provided and expressly disclaims all warranties, express or implied, as to any matter whatsoever. Provider will not be responsible for any loss or damage caused by the use of this data.”
In summary, a retainer agreement is a contract between the investigator and the client. It simply spells out the terms of the assignment, what causes of action are included in the assignment, what is billable, at what rate and any other facets of the relationship that are important to communicate prior to accepting the assignment.
The retainer agreement should be a simple two to three page agreement that makes clear to the client two very important points:
- He or she is entering into a business relationship with the investigator and that relationship requires specific performance from both the client and investigator.
- The retainer agreement binds the client to the terms, conditions and payment in return for the completion of investigative services.
Remember to keep it simple and don’t “over lawyer” your contract (but by all means have your attorney look over your contract before using it) keeping in mind your needs and goals and your client’s needs and goals.
Disclaimer: I am not an attorney. Nothing in this post should be construed as legal advice. If you require legal advice, consult an attorney.