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Contingency Fees – A Detailed Explanation of What They Are

by | Oct 26, 2022 | Contingency Fees

The definition of contingency fees is a contract between the lawyer and their client, which states if the case or issue is successful (the definition of success would also be determined during that period), the lawyer is paid a certain percentage of the settlement of the matter. With a contingent fee agreement, your lawyer will get paid only if you receive compensation through payment or court order in your injury case. By taking the case on contingency, an attorney assumes the risk that they may not be paid for their services. In contingency arrangements, an attorney agrees to take the case without charging his or her standard hourly rate.

Often, those involved in the case, the clients, do not have to pay attorney fees out-of-pocket. In some cases, like personal injury claims, a client may not have the means to pay high attorneys fees upfront. Like attorneys fees, most individuals cannot afford to front the costs needed to make a legitimate claim. Therefore, the law firm will typically advance costs required to run a case until a settlement or judgment is reached so that no out-of-pocket costs are required during a case.

While the client does not need to pay a lawyer to work on a case under this last scenario, there are still legal fees for court filings and other costs involved, whether or not the attorney wins. While lawyers do not get paid until their case is over (and if they do not win, then they are out of the money), there are some upfront fees the client might still have to pay related to working on the case. The lawyer’s fee is dependent upon, or contingent upon, winning their case.

A contingent fee agreement is a written contract signed by a client stating the client pays the attorney for their attorney’s fees, in percentage to money recovered from a case. Contingency fee agreements should also specify if the attorney is required to be paid for any related matters not set in the fee agreement that might arise from the lawsuit. By law, a fee agreement with your attorney should be written when the attorney anticipates that fees and costs in your case will total $1,000 or more. In addition to his fees, your attorney will bill you for other expenses in your case, and you will be responsible for paying those costs, even if your case is unsuccessful. Costs can add up quickly, so it is a good idea to ask your attorney upfront for a written estimate of what those costs will be and whether you will be required to pay those costs directly or if you will reimburse the attorney for those costs on your behalf.

By law, fee agreements with your lawyer must be in writing when the lawyer expects fees and costs for your case to total $ 1,000 or more. In addition to their fees, your lawyer will charge you for other costs of your case, and you will be responsible for paying these costs even if your case is unsuccessful. Costs can add up quickly, so it is a good idea to ask the lawyer in advance for a written estimate of the costs and whether you will have to pay such costs directly or if you will be reimbursing the lawyer for such expenses paid on your behalf. Another benefit to using a contingent fee agreement is that if a case does not turn out the way you hoped, a lawsuit does not turn out as expected. A contingency-hourly arrangement is generally only used if your case is covered by laws allowing the winning party to collect attorney’s fees from the losing party.

Other contingency arrangements are up to the discretion of both attorney and client. They may be used only when it is appropriate for the winning side to recover attorneys fees from the losing side. Alternatively, the contingency might take the form of a surcharge added to an attorney’s fee that is agreed upon if successful, as defined by the parties in their fee contracts.

Under a contingent fee model, the fee amount is a percentage of the recovery value to the client and is contingent upon a specified result. It is illegal to set a portion of a client’s victory as the fee amount. Still, it has been legal since 1990 for the attorney and the client to agree to a starting fee, with the attorney’s fee increasing by a percentage if there is success in an action. The law encourages negotiating contingent fees depending on the case’s complexity, chances of victory, etc.; an actual agreement usually must specify that fees are negotiated between lawyer and client.

Lawyer fees based on contingent fees also encourage hard work and a commitment to getting the best possible result for a client. Lawyers taking cases on a contingent basis have the immediate financial incentive to do everything they can to achieve positive client results. For instance, lawyers regularly decline to be paid on contingency for smaller money, complex, and time-consuming cases.

For example, an attorney might charge $250 an hour, but you will only have to pay $50 an hour before the lawsuit is won — the rest of the attorneys’ fees are paid out of any damages awarded. Suppose the attorney obtains a favorable settlement or wins a jury verdict on your behalf. In that case, the attorney’s fees are a percentage of any money recovered–usually around a third, but it can vary greatly depending on the type of case. The fee is charged only if the case is successful or is settled out of court favorably – no-win, no fee.

Payment of a lawyer’s fees depends on the recovery of money. In this situation, your attorney works for the percentage to be subtracted from the recovery once the attorney has subtracted some fees & costs & fees & costs out of the recovery. According to the Washington State Bar Association, those costs can be paid back to the attorney from any money recovered — so long as the client remains responsible for paying the fees, no matter how much is recovered.

A legal retainer can also mean that a set amount of money is paid to a law firm or attorney upfront (usually a percentage). The remainder is based on whether a case is successful (often known as a success fee). The protections of negotiations and a lack of enforceable contingencies keep a client from thinking standard 60% contingency is required by law. It also keeps attorneys from having to defend their contingency agreements before ethics boards.