Which document defines the legal relationship between a professional firm and its client(s)?

The correct response is the Letter of Engagement. This document is critical in establishing the formal legal relationship between a professional firm—such as a law firm—and its clients. It outlines the scope of services to be provided, the responsibilities of both parties, fees and billing practices, and any terms regarding confidentiality and conflict of interest. By clearly delineating these aspects, the Letter of Engagement provides clarity to the client about what to expect and protects the firm by establishing mutual understanding regarding the professional services rendered.

In legal practice, the Letter of Engagement often serves as the starting point in the attorney-client relationship, providing a written record that can help prevent misunderstandings. While a Contract of Engagement and a Service Agreement might serve a similar purpose in setting terms of a business relationship, they are broader and less commonly used specifically in the context of professional services involving legal representation. On the other hand, a Power of Attorney grants authority to act on behalf of someone else, which is different from defining the relationship outlined in a Letter of Engagement.