A contingency fee is a method of obtaining services from an attorney based on the outcome of your case. Unlike other attorney fees that are paid for each hour of service provided, a contingency fee is paid only when your case is resolved successfully.
What Is a Contingency Fee?
Typically, attorneys charge by the hour – or have an hourly rate for which they provide services. There are some situations where this arrangement is not ideal, which is why they use a contingency fee. Under this type of agreement, the compensation for the attorney is paid only when the client receives compensation. For example, in a lawsuit, an attorney may provide legal services to a client, but the client still loses the case and does not receive the compensation they thought they were owed. In this case, the contingency fee agreement limits how much the client has to pay the attorney since they did not win the case.
Contingency Fee Example
Contingency fees are commonly used in personal injury cases. An attorney agrees to take on the case after a car accident, for example, providing the victim with legal support to seek financial compensation for their losses.
With a contingency fee agreement, the attorney is only paid for their services if the victim receives a settlement or payment from the other party. If they lose the case and the victim does not receive payment, the attorney does not receive full compensation.
Average Contingency Fee
Typically, attorneys charge a contingency fee as a percentage of the compensation won in the case. There is sometimes also a flat fee for their service.
For example, the attorney may charge the client for filing fees and office tasks that must be completed as a flat fee. They may then charge a percentage fee for any compensation received. This is often 30 to 40%, though it differs widely.
What Is a Contingency Fee Agreement?
A contingency fee agreement is a document that both the attorney and client sign to set the payment structure for the work. This document outlines the rights and obligations of both parties. It clearly states that the payment for services is based on contingency and outlines what specifically that fee is.
What to Include in a Contingency Fee Agreement
A contingency fee agreement template can help create a comprehensive, well-organized document. It should typically include the following:
- Identification: The agreement should identify the date, attorney or law firm, and client name, along with the address of each.
- Legal Matter: The contingency fee agreement should state the legal matter that the agreement will specifically apply to.
- Fee and Retainer: List out the specific costs related to the service. This should clearly define the percentage of recovered funds owed to the attorney. It should also list the retainer fee, if applicable.
- Settlement: Identify payment owed in case of pre-trial settlement and any non-monetary settlement terms.
- Demand Notice: Outline any costs of pre-litigation negotiations and services provided hourly if the case does not move forward.
- Client Responsibilities: Outline all pre- and post-litigation responsibilities of the client.
- Termination and Withdrawal: Every contingency fee agreement should outline how the contract ends or how either party can withdraw the agreement.
- Acknowledgment: A recognition that the client has received all informational statements and documents from the attorney.
- Dispute: The contract should also include a method for resolving disputes between the parties.
- Waiver and Integration: A statement that confirms the document as a binding agreement.
- Disclaimer: Use this section to outline factors such as limitations on legal services provided
- No Guarantees: A statement indicating that the attorney makes no guarantees as to the case’s outcome.
- Signatures: The document should be signed, dated, and notarized.
How Does a Contingency Fee Work?
You can expect the following:
- Clients can search for an attorney they wish to work with, checking references.
- Meet with the available and qualified attorneys to discuss the case in a consultation-like setting (many are free).
- Ask for rates and gather insight into costs. Discuss contingency fees with the attorney, and be sure you understand all aspects of the process. Meeting with more than one attorney and comparing offers is advisable.
- Determine which attorney you wish to use. Select one based on the information provided, the experience, and the overall comfort you have with taking on the attorney.
- Sign a contingency fee agreement.
How to Write a Contingency Fee Agreement
Follow these steps:
- Complete the clarification points at the top of the form, including the names and addresses of those involved. Include the date.
- Include a description of the legal matter for which the attorney will provide services and the date on which that will occur.
- In the fee and retainer service, read through the options and select the best one for when the contingency fee and retainer will apply and the specific percentage charged. List the retainer fee agreed to next.
- Outline the requirements for pre-litigation service fees.
- Agree to the settlement amount for any of that work or other work hourly.
- Fill in the hourly rate related to the demand notice and then for any out-of-pocket costs for which the client will be responsible.
- In the termination section, outline what hourly rate will be paid if the agreement ends for work already completed.
- Define the resolution methods to be used in case of any dispute, such as court litigation, binding arbitration, or mediation.
- Signatures are then placed at the bottom and should be notarized.
Contingency Fee Agreement Sample
Below, you can see a sample contingency fee agreement:
