Fee Agreement (New Zealand)

A Fee Agreement is a contract that sets out the terms on which a professional or consultant will charge for their services. It is distinct from a full service agreement in that it focuses primarily on the financial terms — the fee structure, billing frequency, payment terms, and consequences of non-payment — rather than the detailed scope of services. In New Zealand, Fee Agreements are commonly used by lawyers, consultants, accountants, engineers, architects, and other professionals who provide services on an ongoing or project basis. Under the Lawyers and Conveyancers Act 2006, New Zealand lawyers are required to provide clients with information about their fees (typically in an engagement letter) before commencing work. For other professionals, a Fee Agreement is established standards even though it may not be legally required. A Fee Agreement provides certainty for both the professional and the client about the cost of services, reduces the risk of fee disputes, and provides a contractual basis for recovering unpaid fees through the courts or the Disputes Tribunal if necessary. All fees under a New Zealand Fee Agreement should address GST at 15% under the Goods and Services Tax Act 1985.

New Zealand professionals use several fee structures depending on the nature of the engagement: (1) Hourly rate — the professional charges for each hour (or part-hour) of time spent, recorded in a timesheet. This is common for legal, consulting, and accounting services where the scope of work cannot be precisely estimated upfront. (2) Fixed fee — a lump sum agreed for a defined scope of work. This gives the client cost certainty but requires the scope to be clearly defined — scope creep (additional work beyond the agreed scope) is typically charged extra. (3) Retainer — a regular monthly fee for ongoing availability and services up to a specified number of hours. Common for general counsel, PR retainers, and ongoing consulting. (4) Capped fee — an hourly rate billing structure with a maximum cap, giving the client a degree of cost certainty while allowing for the actual time spent. (5) Contingency fee — a fee contingent on the outcome of the matter (common in litigation, less common in consulting). New Zealand lawyers may not charge contingency fees (uplift fees) in contentious matters under the Lawyers and Conveyancers Act 2006.

Under the Interest Act 1956, a New Zealand professional may charge interest on overdue fees if the Fee Agreement expressly provides for interest. Without an express provision, interest on a debt is generally not recoverable as of right. The Fee Agreement should specify: the interest rate (commonly the bank overdraft rate plus a margin, e.g., 2–3% per month; note that very high rates may be considered penalties and unenforceable); the date from which interest accrues (e.g., from the due date of the invoice); and whether interest is charged on the principal only or on the accumulated principal and interest. The Disputes Tribunal can award interest on debts at a rate prescribed by the Judicature Act 1908 (currently 5% per annum) if the contract does not specify an interest rate, provided the creditor proves the debt is overdue. Late payment interest provisions should be commercially reasonable — a rate that is punitive and disproportionate may not be enforced. It is also good practice to include a provision allowing the professional to suspend services if fees remain unpaid beyond a specified period, which is a more immediate and practical remedy than interest alone.

Disbursements and expenses are costs that the professional incurs on behalf of the client in the course of providing services — for example, filing fees, search fees, travel costs, printing costs, courier charges, and expert witness fees. A New Zealand Fee Agreement should clearly specify: which expenses are charged at cost (passed through without markup); which expenses are subject to a handling fee or markup; the prior approval threshold above which the client must authorise a disbursement before it is incurred; the reimbursement process (included on the professional's fee invoice or invoiced separately); and the GST treatment. Under the Goods and Services Tax Act 1985, some disbursements that the professional incurs as agent of the client (true disbursements) may not attract GST on the professional's invoice, while others that are incurred by the professional as principal and on-charged to the client will be subject to GST. The distinction can be complex, and professionals should seek GST advice on the treatment of specific disbursements. The Fee Agreement should also address travel time — some professionals charge for travel time at their full hourly rate, others at a reduced rate, and others not at all.

A Fee Agreement (New Zealand) does not legally require a lawyer in New Zealand, and individuals and businesses may draft and execute the document independently. The Companies Act 1993 does not mandate legal representation for the creation or signing of this type of document. However, seeking independent legal advice from a qualified New Zealand lawyer is recommended for transactions involving substantial financial value, complex regulatory requirements, or cross-border elements where multiple legal jurisdictions may apply. A lawyer can verify that the document complies with all applicable statutory requirements, identify potential risks specific to the transaction, and confirm that the terms adequately protect the interests of all parties involved. The High Court of New Zealand has jurisdiction over disputes arising from this type of document, and Companies Office may impose additional compliance obligations depending on the nature of the underlying transaction. Professional legal review is particularly advisable where the document will be submitted to government agencies or used as evidence in legal proceedings.