A contingency fee agreement is a common arrangement between an attorney and client in a personal injury case. Under this agreement, the attorney agrees to accept a fixed percentage of the client’s recovery as payment for legal services, rather than billing hourly.
Contingency fee basics
The hallmark of a contingency fee agreement is that the attorney only gets paid if the case results in a monetary recovery for the client. If the case is unsuccessful, the attorney does not receive any compensation for their work. This transfers the risk from client to attorney.
The typical contingency fee percentage is 33-40% of the total recovery amount. Some attorneys may negotiate a tiered percentage based on when the case settles. For example, 33% if settled before filing a lawsuit, 40% if settled after filing suit.
Advantages of contingency fee agreements
For clients, the main advantage of a contingency fee agreement is not having to pay anything upfront or out-of-pocket for legal services. This removes the financial barrier to pursuing a claim. It also incentivizes the attorney to achieve maximum recovery.
For attorneys, contingency fee agreements provide income for their work while also screening out frivolous or weak cases that are unlikely to result in a settlement or judgment.
When are contingency fees appropriate?
Contingency fees are most appropriate in personal injury cases where there are calculable economic and non-economic damages resulting from someone else’s negligence. Common examples include car accidents, premises liability, medical malpractice, and defective products.
Contingency fees are generally not suitable for criminal defense, family law matters, or business transactional work where monetary recovery is not the goal. Most attorneys will not accept contingency fees for these types of cases.
Contingency fee agreement details
A solid contingency fee agreement will spell out key details in writing, including:
– Percentage amount of attorney fees based on recovery
– Definition of “recovery” – does it include just the settlement amount or settlement plus awarded costs?
– Expenses – Which case expenses are deducted prior to calculating the contingency fee?
– Non-monetary recovery – Does the attorney still get a fee if the settlement is structured or part of recovery is obtaining insurance benefits?
– Termination provision – Can either party terminate the agreement and under what terms?
Contingency fee FAQs
Here are answers to some frequently asked questions about contingency fee agreements:
What happens if my case is dismissed or lost?
If no recovery is obtained, you do not owe any attorney fees or expenses under a pure contingency fee agreement. However, some agreements make clients responsible for court costs.
Who pays the case expenses?
The attorney typically advances all case expenses, which are then deducted from the settlement or judgment amount prior to calculating their contingency fee percentage.
What case expenses are included?
Typical expenses are things like court filing fees, expert witness fees, investigation costs, records, and other items directly related to pursuing the claim. Routine office expenses are covered by the attorney’s contingency fee.
Can I still fire my attorney after signing a contingency fee agreement?
Yes, you can terminate the attorney-client relationship at any time, for any reason. But if done prior to settlement you may still owe fees for the work performed.
Conclusion
A contingency fee agreement can provide clients with access to legal services that they may not otherwise be able to afford. This fee arrangement shifts risk to the attorney and incentivizes maximizing recovery. Key terms of the agreement should be negotiated upfront and documented clearly in writing. With a solid contingency fee agreement in place, both client and attorney can focus their efforts on achieving the best possible outcome.
