A retainer between a lawyer and their client is a contract for legal services. In order to enter into a contract, the parties must have the necessary capacity at the time of signing. In other words, both the client and the lawyer must have the ability to understand the information that is relevant to their decision, including appreciating the reasonably foreseeable consequences of their decision and the consequences of failing to make a decision. Where a person meets this test, they are able to enter into a contract and retain counsel.
At common law, an adult is presumed to be capable unless proven otherwise. This is codified in Section 2 of the Ontario Substitute Decisions Act, which provides that a person is deemed to be capable until assessed as being incapable.
A separate issue may arise regarding whether a person can “instruct” counsel – tell their lawyer what to do in their legal matter. In order to “instruct” counsel, the client must have the ability to understand the financial and legal issues involved at the time of providing instructions to their lawyer. Signing the retainer contract is a one-time event, but instructing counsel is a continuous and ongoing process. Lawyers must continuously assess whether their clients are capable of understanding the financial and legal issues involved each time they require instructions or the client seeks to provide instructions.
Capacity is fact and task-specific, and it can change over time. As a result, it is possible that the client can have the capacity to instruct their lawyer on certain matters or at certain times, but not others. If a lawyer determines that they are not able to take instructions from their client because of concern regarding their capacity, the lawyer must ensure that they meet all of the obligations upon the lawyer from both the Rules of Professional Conduct for lawyers in Ontario as well as the rules applicable to the legal matter, whether court or tribunal. The lawyer has an ethical obligation to ensure that the client’s interests are not abandoned. In many situations, lawyers will need to take steps involving having a lawfully authorized representative appointed.
 Guardian Law Group v. LS, In Her Capacity as Guardian and Trustee for RL 2021 ABQB 591 (CanLII)