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I needed some legal help from a law firm (in India), and visited them to ask them how much they charge. They said it's their billing department that decides that, and they'd get back in touch by email.

They replied back in a day by email asking what kind of help I need. I mentioned that I'd need to draft an agreement with a prospective client and wished to know approximately how much the law firm would charge for it, specifically mentioning "For now I'd just like to know the approximate charges for the above types of requirements, so that I could compare and decide which legal firm / lawyer would be appropriate, based on my requirements".

In response they've sent me an engagement letter where they typed my mobile number wrongly (they mentioned my name correctly, my email id correctly, but have put somebody else's mobile number), they've mentioned the background and scope of work, their hourly fees (which does not look reasonable to me), a clause for termination of the agreement etc. "The engagement will commence from execution of this Engagement Letter and will remain valid, subject to revision of professional fee annually. Either Party can terminate this engagement letter by providing a thirty days prior written notice. If due to unforeseen circumstances or for certain reasons, if any of the Parties wish to terminate the assignment while it is still in progress, the invoice will be for fees on the basis of time spent, as well as OPE, upto the date of communication of termination of engagement".

The problem:
Firstly, since these people didn't even type my mobile number correctly, I'm uneasy about them drafting a legal agreement for me, where I wanted each and every clause to be thoroughly checked. I'm not confident of them being thorough.
How do I tell them that I do not need their services? Does their sending of an engagement letter mean that I pay them for their time of drafting the letter? I wasn't expecting an engagement letter. I was expecting something like an ordinary email which said something like "this is our approximate hourly fee".

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No.

An engagement letter is a written confirmation that you have hired a lawyer which also sets forth the contractual obligations of the parties (i.e. the basis upon which attorneys' fees will be charged in the case).

Instead of serving as an "estimate" or "approximate quote" of the fees to be charged, it is evidence that there is an attorney-client relationship and it sets forth the contractual terms of that relationship.

Unless the engagement letter is for a fixed fee (which is uncommon but not unheard of), it only sets forth a method for determining what legal fees are owed and does not predict in advance what those fees will be.

An engagement letter often does set forth a "retainer" amount that must be paid when the lawyer is hired, but a "retainer" is more akin to a security deposit on a lease than an estimate of what the total charges for the representation will be.

Lawyers are required as a matter of professional ethics to put these things in writing.

Of course, it wouldn't be improper for an engagement letter to include an estimate of the fees that will be charged in a representation as well as the other matters described above. But, that would be rather unusual.

Firstly, since these people didn't even type my mobile number correctly, I'm uneasy about them drafting a legal agreement for me, where I wanted each and every clause to be thoroughly checked. I'm not confident of them being thorough.

This certainly doesn't make a great first impression, although it reflects more on the quality of the office staff than on the legal acumen of the lawyers. I wouldn't blow a simple typo in writing a phone number out of proportion.

How do I tell them that I do not need their services?

Advise them by telephone, or better yet by letter, email or text, that you have decided not to retain their services.

Does their sending of an engagement letter mean that I pay them for their time of drafting the letter?

The firm probably could charge you, but it is customary not to charge for drafting an engagement letter.

I wasn't expecting an engagement letter. I was expecting something like an ordinary email which said something like "this is our approximate hourly fee".

Lawyers, as you might expect from their line of work, need to be more formal as a result of their legal ethics requirements, so this is very normal. The engagement letter constitutes a contract between the parties if the engagement is commenced. An informal communication, followed by a formal one, could lead to confusion over which one applies and could lead to mistakes where someone given an informal communication never received the required formal engagement letter.

their hourly fees (which does not look reasonable to me)

Lawyers are expensive, and good lawyers are worth it. The supply and demand issues are particularly intense in India because there are fewer lawyers there capita than in many other countries.

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