Last reviewed 9 September 2026
One of the first questions businesses ask before instructing a commercial lawyer is how the work will be charged and what it is likely to come to in total.
There is no single right answer. Fixed fees, hourly rates, capped fees and staged pricing all suit different kinds of work, and the sensible choice depends on how well the scope can be defined at the outset.
This guide sets out how commercial legal pricing generally works so you can have a clearer conversation with any firm you approach. It is general information, not a quote, and you should discuss your own matter directly to get a figure.
What actually drives the cost
Three things: how much of the work can be scoped in advance, how many rounds of negotiation the other side will require, and how much of the input is judgement rather than drafting. A standard document drafted from a clear brief is predictable. The same document once a counterparty's legal team is marking it up is not.
Volume and urgency matter too. Ten similar contracts cost less each than one, and work compressed into forty eight hours costs more than the same work over two weeks.
Where fixed fees work well
Fixed fees suit defined pieces of work with a clear finish line: drafting a set of terms and conditions, preparing a shareholders' agreement from an agreed term sheet, a non disclosure agreement, a company formation and constitutional documents, or a review of a contract with a written report.
The benefit is budget certainty and no clock watching, which encourages you to pick up the phone rather than save up questions. The trade off is that the scope must be defined, and work outside it is a separate fee.
Where hourly billing is fairer
Disputes, negotiations with an unpredictable counterparty, regulatory investigations and complex transactions are hard to price up front because the other side determines much of the workload.
In those cases an hourly rate with a written estimate, agreed reporting points and an obligation on the firm to tell you before the estimate is exceeded gives you control without forcing a risk premium into a fixed price.
The middle options
Capped fees set a ceiling while charging by time up to it. Staged pricing breaks a matter into phases with a separate price for each, so you decide at each gate whether to continue. Retainers suit businesses with steady low level demand and give priority access for a monthly amount.
For contract negotiations, a common structure is a fixed fee for the first draft and a defined number of rounds of mark up, then an agreed rate for further rounds.
Questions worth asking before you instruct
Ask what is included and excluded, who will actually carry out the work, what triggers a further fee, whether disbursements such as filing fees are extra, whether VAT is included in the figures given, and what happens if the matter settles or aborts early.
Ask for it in writing. A short engagement letter setting out scope, price basis and assumptions prevents almost every fee dispute that arises later.
Keeping the cost down
Come with the documents and a written summary of the commercial deal. Nominate one decision maker rather than routing comments through several people. Involve the lawyer before terms are informally agreed rather than after, because unpicking an agreed position costs more than getting it right first.
Be honest about the budget. A good adviser will tell you where to spend and where a lighter touch review is enough, but only if they know the constraint.
Key points
- Predictable scope makes a fixed fee possible.
- Disputes and open ended negotiations usually suit hourly billing with an estimate.
- Capped and staged fees sit between the two and preserve control.
- Always confirm scope, exclusions, VAT and disbursements in writing.
- Volume reduces the unit cost, urgency increases it.
- Early involvement is cheaper than fixing an agreed position.
Frequently asked questions
- Can commercial contract work be done on a fixed fee?
- Frequently yes, where the scope is clear. Drafting a set of terms, an agreement from an agreed term sheet or a contract review with a written report can usually be priced up front. Open ended negotiation is normally priced separately.
- Why will a firm not fix a fee for a dispute?
- Because the other side controls much of the work. The number of rounds of correspondence, applications and hearings is outside the firm's control, so a fixed price would have to include a large risk margin that most clients would rather not pay.
- What is a capped fee?
- Work is charged by time but cannot exceed an agreed ceiling. You pay less if the matter takes less time, and the firm carries the risk above the cap.
- Should I ask for an estimate in writing?
- Yes. A written scope and estimate, including what is excluded and what would trigger a further fee, is the single most effective way to avoid a disagreement about costs later.
- Is the cheapest quote the best value?
- Not necessarily. Compare what is included, who will do the work and how negotiation rounds are treated. A low headline price with narrow scope can end up costing more than a fuller fixed fee.