Contingency Fee Agreement

What is a Contingency Fee Agreement?

A contingency fee agreement is a payment arrangement that allows a client who has a claim but cannot afford to obtain legal representation. In this arrangement, the lawyer agrees to accept a fixed percentage (often one-third) of the recovery, which is the amount won in case of victory or settlement.

If the case is lost, the lawyer receives no fee, but the client may still be responsible for litigation costs (like court fees, filing fees, and costs related to depositions or expert witnesses).

What are the benefits of creating a Contingency Fee Agreement?

Contingency fee agreements are most common in cases such as personal injury, property damage, workers' compensation, and other cases involving substantial monetary claims. They offer several potential benefits:

1. Access to Justice: They enable individuals who may not be able to afford the hourly rates of lawyers to obtain legal representation. This facilitates access to justice, particularly for those with legitimate claims but limited resources.
2. Aligning Interests: Lawyers working on contingency are incentivized to do their best work; their payment depends on the success of the case, aligning their interests with those of their clients.
3. Risk Mitigation: For clients, the financial risk of pursuing a lawsuit is reduced. If the case is unsuccessful, they do not have to pay the attorney's fees (though, as mentioned, they may still be liable for certain litigation costs).
4. Ease of Payment: When the case is won, the lawyer’s fees are typically deducted from the recovery amount before the client receives it, making the payment process straightforward.

It is important for those entering into a contingency fee agreement to understand the terms fully, including what costs they're responsible for, and to ensure that the arrangement is in writing.