---
title: "Instruction letter and terms of engagement for external lawyers (in-house client, including AI use and billing rules)"
url: "https://ailawframework.com/precedents/in-house-general-counsel/external-counsel-instruction-letter-and-terms"
type: "precedent"
site: "AI Law Framework"
id: "a40-external-counsel-instruction-letter-and-terms"
area_id: "A40"
kind: "letter"
ai_level: "yellow"
version: 1
task_ids: ["A40-T1-R10"]
law_stated_as_at: "2026-10-18"
---

# Instruction letter and terms of engagement for external lawyers (in-house client, including AI use and billing rules)

> A letter from an in-house legal team instructing an external law firm on one matter: scope, who gives instructions, team, estimate and cap, billing rules, privilege handling, data security, the firm’s use of AI and…

Canonical page: https://ailawframework.com/precedents/in-house-general-counsel/external-counsel-instruction-letter-and-terms  
Law stated as at: 2026-10-18

Site index for agents: https://ailawframework.com/llms.txt

A letter from an in-house legal team instructing an external law firm on one matter: scope, who gives instructions, team, estimate and cap, billing rules, privilege handling, data security, the firm’s use of AI and reporting.

## Key facts

- Kind: Letter. A letter or email you adapt and send.
- Practice area: [In-House / General Counsel](https://ailawframework.com/precedents/in-house-general-counsel.md)
- Jurisdictions: Australia, New South Wales, Victoria, Western Australia
- AI level: Yellow. AI can help in set ways. A lawyer checks specific points before use.
- Law stated as at: 2026-10-18
- Status: Maintained. Checked on 2026-10-18 against the 2 authorities it cites, for 4 jurisdictions.

## When to use it

Use for each new matter sent to a panel or other external firm, alongside any panel deed. It sets the organisation’s own terms; it does not replace the firm’s costs disclosure where the organisation is not a commercial or government client under the Legal Profession Uniform Law.

## Used for these tasks

- [Draft an external-counsel brief and an invoice check against the engagement](https://ailawframework.com/practice/in-house-general-counsel.md#A40-T1-R10)

## How AI may be used

AI may assemble the letter from the matter request and panel terms and later check invoices against it, but the in-house lawyer settles the scope, estimate and instructions and sends the letter.

**AI may:**

- Fill the matter details, team, rates and estimate into the approved letter from the request form and the panel rate card
- Check each invoice against the scope, rates, cap and billing rules in the letter and list the lines to query
- Track spend against the estimate and remind the matter owner when the notification threshold is reached

**AI must not:**

- Must not decide the scope of instructions, the estimate or whether to approve work beyond the cap
- Must not put privileged or confidential matter material into a tool that retains or trains on inputs
- Must not reject or approve an invoice; it lists queries for the matter owner to decide

**The lawyer checks:**

- Scope and out-of-scope items are specific enough to measure invoices against
- Whether the organisation is a commercial or government client under s 170 of the Uniform Law, and so whether the firm must still give costs disclosure, has been considered
- The AI-use terms match the organisation’s AI policy and any court practice note that will apply if the matter is litigated
- Named people authorised to instruct the firm are current, and privileged communications go only to legal

## Authorities

- [Legal Profession Uniform Law s 170 (commercial or government clients: Part 4.3 costs disclosure does not apply, except the listed provisions)](https://www7.austlii.edu.au/cgi-bin/viewdoc/au/legis/nsw/consol_act/lpul333/s170.html)
- [Evidence Act 1995 (Cth) s 118 (legal advice privilege, dominant purpose)](https://classic.austlii.edu.au/au/legis/cth/consol_act/ea199580/s118.html)

## Full text and drafting notes

The full text and the drafting notes are not part of this public page. Signed-in firm accounts can read them at https://ailawframework.com/precedents/in-house-general-counsel/external-counsel-instruction-letter-and-terms and through the signed-in MCP connector https://ailawframework.com/mcp/firm.

*Practice guidance for planning and review. Confirm current primary sources and the requirements of the actual matter. This is general information, not legal advice.*