Limiting Exorbitant Lawyer’s Fees – part I | Beit Din Eretz Hemda - Gazit | Beit Midrash

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Case: The defendant (=def), a real estate development firm, hired the plaintiff (=pl), a law firm, to represent it in Israeli courts, in a suit of an Arab in which Jordanian law was involved. The hope was that pl could remove the suit at a preliminary stage of the litigation. They signed a contract that provides pl an hourly fee of 750 NIS. Def was to pay immediately 7,500 NIS for a ten-hour minimum, and upon completion of those hours, was to pay monthly based on itemized billing. Def asked pl to inform them when the ten hours were about to finish, which pl did. As that point was reached and the court refused to throw out the suit, def expressed concern with the expense, and while continuing to interact with pl, requested negotiations for a fixed fee for the case; pl neither rejected nor accepted this request. About two months later, pl sent a bill for 39,000 NIS, which def claim not to have received for a few weeks. Soon thereafter, def sent a letter complaining that they had been charged before further negotiations. Pl slowed down their work to a minimum, and a few months later def fired pl, around the time pl sent another bill for 36,000 NIS. Pl want to get paid according to their work. Def respond that they understand the agreement, in writing and especially orally, to require renegotiating. Def also claim that the Israeli Bar Society and the courts reject lawyers’ unjustifiably exorbitant fees, which applies here regarding land of modest value (their new lawyer is taking 400 NIS an hour).

Ruling: It is apparent from the written contract that the mechanism of payment by hour continues past the ten hours. Neither side claims that the other side lied or purposely misled the other. However, even if def thought that the initial stage would not take much longer than ten hours and that they would then negotiate, they are bound to the written words they signed. We apply the rule that regarding monetary agreements, matters one had in his heart are not consequential (Shulchan Aruch, Choshen Mishpat 207:4). The logic to extend this even to a case where the one obligating himself actually misunderstood is either that we assume mechila to go along with that which he unintentionally agreed to or that a person is responsible for what he should have known (see Chok L’Yisrael, Pegamim B’chozeh, p. 118-119).
All agree that def let it be known that they asked at some point to change the pricing system; the sides disagree about whether pl acquiesced orally. However, def agree that there was not a new agreement in place, and so since def continued to employ pl, it is based on the old agreement (see Aruch Hashulchan, CM 333:30). If def were not willing to continue according to the existing agreement until changed, they should have stopped pl’s work. In fact, they did so did only months later.