| Bartering is a way to exchange goods or services for other goods or services without using money. We have all heard stories of rural doctors and lawyers who bartered their services for chickens and eggs. But does this still happen? Would you provide legal services in exchange for a new website or a new roof? |  |
Lawyers still need to pay their bills, and as far as I know the banks are not accepting homemade cookies as mortgage payments. Bartering only works if we can find someone who needs our services and who is offering goods or services for which we have a need. However, if we were open to alternative payment options, we may be able to provide legal services to clients who cannot afford legal representation. This is especially true for those practicing in areas with a high number of self-represented litigants such as family law.
Is Bartering Allowed by the LSUC?
Nothing in the Rules of Professional Conduct, or the by-laws specifically addresses bartering arrangements. Nevertheless, a lawyer contemplating bartering her legal services should carefully review the Rules and by-Laws to make sure her barter arrangement is in compliance. For example, Rule 3.6-1 provides that a “lawyer shall not charge or accept any amount for a fee or disbursement unless it is fair and reasonable and has been disclosed in a timely fashion.” The goods or services you are receiving must be commensurate with the services you provide. Furthermore, all record-keeping responsibilities should be met and the work should be properly invoiced.
The only clear guidance that I could find from the LSUC, was in a decision by the Law Society Tribunal which confirmed the obvious: “Legal services are not to be bartered for sexual favours.”
Barter-Exchange Programs
Bartering in general has become more sophisticated and moved past the chicken and egg days with numerous “barter-exchange programs” throughout Canada and the United States. A barter exchange acts as a clearinghouse for the exchange of goods and services and keeps track of the value of the barter transactions between members. Members often have to pay dues or fees to join. (For example see, eXmerce, Barter Network Limited and Swap Right).
There is little guidance on lawyers using barter exchange networks in Canada. I found a Tax Court of Canada case[1] from 1985 where a lawyer bartered his legal services on a barter exchange network called Tradex. The lawyer would obtain ‘exchange credits’ from other members for his legal services and he would exchange these credits for other services (i.e. dental services for himself and his family). The issue for the Court was the value of those exchange credits for income tax purposes. (Yes, any service or good you receive in payment is considered income and must be reported. See the CRA bulletin on “Barter Transactions”).
Not surprisingly, I found more resources for lawyers on bartering exchange programs south of the border. Recently, the Connecticut Bar Association’s Standing Committee on Professional Ethics released an informal opinion on a lawyer’s participation in such a program.
The report noted that early ethics opinions from state bar associations and the American Bar Association in the late 1970s were “undeniably hostile” to barter exchanges and the fees charged to their members. However, recent opinions have been more amenable.
The Connecticut Bar Association concluded that participation in such an exchange was not unethical, but lawyers must still comply with the relevant rules of professional conduct, including those dealing with confidentiality, client solicitation and advertising. Importantly, the “cardinal principle” still applies: “the fee must not be unreasonable, regardless of the form of payment”.[2] It did not see the fee paid to the barter exchange program to be fee sharing (which is prohibited with a non-lawyer) but confirmed that there should be a written engagement agreement, including that barter currency will be used as the compensation for legal services.
To Barter or Not To Barter:
If you are considering bartering your legal services (either as a one-off arrangement or through a barter exchange program), be prepared and:
[1] Linett and Karoly v The Minister of National Revenue, 85 DTC 416.
[2] Connecticut Bar Association, Standing Committee on Professional Ethics, Informal Opinion 15-04 “Lawyer’s Participation in a Barter-Exchange Program” July 2015 at p. 2
Note: Content from this blog does not constitute legal advice and is for informational purposes only.
Is Bartering Allowed by the LSUC?
Nothing in the Rules of Professional Conduct, or the by-laws specifically addresses bartering arrangements. Nevertheless, a lawyer contemplating bartering her legal services should carefully review the Rules and by-Laws to make sure her barter arrangement is in compliance. For example, Rule 3.6-1 provides that a “lawyer shall not charge or accept any amount for a fee or disbursement unless it is fair and reasonable and has been disclosed in a timely fashion.” The goods or services you are receiving must be commensurate with the services you provide. Furthermore, all record-keeping responsibilities should be met and the work should be properly invoiced.
The only clear guidance that I could find from the LSUC, was in a decision by the Law Society Tribunal which confirmed the obvious: “Legal services are not to be bartered for sexual favours.”
Barter-Exchange Programs
Bartering in general has become more sophisticated and moved past the chicken and egg days with numerous “barter-exchange programs” throughout Canada and the United States. A barter exchange acts as a clearinghouse for the exchange of goods and services and keeps track of the value of the barter transactions between members. Members often have to pay dues or fees to join. (For example see, eXmerce, Barter Network Limited and Swap Right).
There is little guidance on lawyers using barter exchange networks in Canada. I found a Tax Court of Canada case[1] from 1985 where a lawyer bartered his legal services on a barter exchange network called Tradex. The lawyer would obtain ‘exchange credits’ from other members for his legal services and he would exchange these credits for other services (i.e. dental services for himself and his family). The issue for the Court was the value of those exchange credits for income tax purposes. (Yes, any service or good you receive in payment is considered income and must be reported. See the CRA bulletin on “Barter Transactions”).
Not surprisingly, I found more resources for lawyers on bartering exchange programs south of the border. Recently, the Connecticut Bar Association’s Standing Committee on Professional Ethics released an informal opinion on a lawyer’s participation in such a program.
The report noted that early ethics opinions from state bar associations and the American Bar Association in the late 1970s were “undeniably hostile” to barter exchanges and the fees charged to their members. However, recent opinions have been more amenable.
The Connecticut Bar Association concluded that participation in such an exchange was not unethical, but lawyers must still comply with the relevant rules of professional conduct, including those dealing with confidentiality, client solicitation and advertising. Importantly, the “cardinal principle” still applies: “the fee must not be unreasonable, regardless of the form of payment”.[2] It did not see the fee paid to the barter exchange program to be fee sharing (which is prohibited with a non-lawyer) but confirmed that there should be a written engagement agreement, including that barter currency will be used as the compensation for legal services.
To Barter or Not To Barter:
If you are considering bartering your legal services (either as a one-off arrangement or through a barter exchange program), be prepared and:
- Clearly set out your barter arrangement in writing;
- Consider how and when will you be paid;
- Make sure your arrangement complies with all of the Rules of Professional Conduct and relevant by-laws;
- Ensure that the barter arrangement represents a fair and reasonable fee for services;
- Provide an invoice and keep proper records; and
- Don’t forget bartering is subject to income tax.
[1] Linett and Karoly v The Minister of National Revenue, 85 DTC 416.
[2] Connecticut Bar Association, Standing Committee on Professional Ethics, Informal Opinion 15-04 “Lawyer’s Participation in a Barter-Exchange Program” July 2015 at p. 2
Note: Content from this blog does not constitute legal advice and is for informational purposes only.
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