Cost can be a significant barrier to some individuals’ ability to obtain legal counsel. Even when it may seem as though you have a meritorious claim, the thought of having to put down large retainers or pay hefty hourly fees can be overwhelming. When faced with the choice, some may opt to represent themselves or, worse, forego asserting their legal rights altogether.
Contingency fee arrangements aim to make retaining legal counsel affordable and less demanding for individuals, especially those who might not have significant financial resources. By shifting much of the financial risk of representation to the attorney, clients can pursue their claims knowing they will not face large legal bills if their efforts fail.
However, as advantageous as contingency fee arrangements can be, they are not permitted in every case. Depending on your legal needs, do not be surprised if your lawyer cannot offer a contingency fee arrangement.
What Are Contingency Fee Arrangements?
In a typical legal services contract, you agree to pay the counsel you hire a specific sum for their legal knowledge and representation. They will earn their fees the moment they provide their services, not necessarily when the case is concluded. Moreover, they will earn their fees regardless of how your case is resolved.
A contingency fee arrangement, in contrast, makes both the payment of the lawyer’s fees and the amount the lawyer receives contingent on the outcome of the case. It would be as if a doctor did not charge you for office visits or follow-up care until you get better.
Under a contingency fee arrangement, a lawyer receives a percentage of the financial recovery they obtain for their client. The higher the financial recovery the client obtains, the larger the amount of fees the attorney collects. These fees are paid directly from the recovery award, so the client never has to pull from their existing resources to pay their attorney’s fees.
Elements Of A Contingency Fee Arrangement
Contingency fee arrangements typically have three primary components:
“No-Fee” Guarantee
Unambiguous language stating that the client does not owe any legal fees to the attorney if their case does not succeed should be at the core of every contingency fee agreement.
Payment Of Other Fees
In addition to attorney fees, a lawyer may incur other costs when representing a client, such as deposition costs, expert witness fees, and expenses associated with obtaining and reproducing records.
The contingency agreement should, therefore, spell out whether the client is responsible for these costs and, if so, whether their payment is contingent on their case’s outcome.
Fee As a Percentage Of The Recovery
Instead of setting a specific dollar amount, a contingency fee arrangement will provide a lawyer with a percentage of their client’s recovery. That, in turn, means that the more money the lawyer recovers for the client, the larger their fee can be.
The overall percentage the attorney will take will depend on the following factors:
- The kind of case it is and its complexity
- The compensation value received
- The stage of proceedings is the case resolved within
- Whether the case is resolved at trial or through a settlement
There are limits on how great a percentage attorneys can take as well. In most cases, a lawyer could not, for example, claim half or more of the client’s recovery. A more common percentage seen in contingency fee arrangements is 33 percent.
Not Every Case Can Use Contingency Fee Arrangements
Contingency fee arrangements are popular among personal injury lawyers. In these cases, an injured individual may not have the financial means to retain an attorney’s services, especially if they are already facing significant medical bills and time missed from work.
Lawyers who practice employment law may also offer contingency fee arrangements to individuals who were wrongfully terminated or the subject of discrimination. These individuals, too, might lack the financial resources to hire an attorney quickly.
However, lawyers are prohibited from offering contingency fee arrangements in family law cases. In other words, a lawyer cannot enter into a fee arrangement with a client in a divorce or custody case that makes the payment of the lawyer’s fees contingent upon any of the following:
- Obtaining a divorce decree
- Securing spousal support
- Being awarded primary custody or a specific amount of child support
- Receiving a favorable division of property
Similarly, attorneys cannot offer contingency fee arrangements in criminal matters. If you are charged with a crime, your lawyer cannot make their fees dependent on securing you a particular outcome. To permit contingency fees in criminal cases would raise ethical concerns, especially if attorneys have financial incentives to encourage their clients to plead guilty.
Alternatives To Contingency Fee Arrangements
In cases where contingency fee arrangements are not permitted, you can expect lawyers to offer either a traditional hourly fee structure or a flat fee arrangement.
In the former arrangement, you’ll agree to pay your attorney a set rate for all work they perform in your case. You are responsible for paying these fees as earned by the lawyer, regardless of the outcome of your case.
Other attorneys can charge you a flat fee for their services. For example, an attorney may charge you $500 to file a simple, uncontested divorce petition.
Contingency Fee Arrangements Are Helpful Where Permitted
Contingency fee arrangements make retaining an attorney accessible and less risky for individuals in need of legal aid. They are popular among personal injury attorneys and employment law firms representing employees. In these agreements, whether a lawyer receives any fees for their services depends on the outcome of the client’s case.
However, despite their advantages, lawyers cannot offer contingency fee arrangements in family law matters like divorces or custody proceedings. Similarly, lawyers cannot represent a client on a contingency fee basis in a criminal case. For any other matter, lawyers can enter into these arrangements if they desire.