Brief Fact Summary. A corporation and a private attorney entered into a contract for the private attorney to provide the company's officers legal advice on an "as needed" basis. The validity of a provision in the contract requiring the corporation to pay damages if they terminated contract even for "good cause" was at issue.
Synopsis of Rule of Law. A provision in an agreement between an attorney and a client cannot contain a provision for the client to pay damages if the client breaks the contract.
Issue. Must an attorney's client pay legal fees to an attorney after terminating a long time retainer contract?
Held. No. An attorney is not eligible to collect damages under a penalty clause in a retainer contract when the client "exercises the legal right to terminate the attorney's retainer contract." The Supreme Court of Georgia observed "[t]o force all attorney-client agreements into the conventional status of commercial contracts ignores the special fiduciary relationship created when an attorney represents a client." As such, "a client has the absolute right to discharge the attorney and terminate the relation at any time, even without cause" and "[a] client's discharge of his attorney is not a breach of the contract of employment but the exercise of his right." For reasons of public policy, the Supreme Court of Georgia favored "AFLAC's freedom in ending the attorney-client relationship without financial penalty over Williams' right to enforce the damages provision in his retainer contract. Requiring a client to pay damages for terminating its attorney's employment contract eviscerates the client's absolute right to terminate." The court took this provision to its logical extreme and observed "[t]he effect of this provision would be to require a client to pay an attorney terminated for embezzling client funds."
Discussion. This case illustrates an interesting distinction in how courts construe normal commercial contracts and contracts between attorneys and their clients.