A contingency fee agreement is a payment arrangement between a client and a lawyer, where the lawyer only gets paid if the case is won, providing clients access to legal services they may not otherwise afford.

The lawyer is incentivized to secure the best outcome in this scenario.

A contingency fee is a method of obtaining services from an attorney based on the outcome of your case. Unlike other attorney fees for each hour of service provided, a contingency fee is paid only when your case is resolved successfully.

Table of Contents

• What Is a Contingency Fee?
• Contingency Fee Example
• What Is a Contingency Fee Agreement?
• What to Include in a Contingency Fee Agreement
• How Does a Contingency Fee Work?
• How to Write a Contingency Fee Agreement
• FAQs
• What is a contingency fee agreement?
• What types of cases typically use contingency fee agreements?
• How are attorney fees calculated in a contingency fee agreement?
• Do I have to pay upfront legal fees with a contingency fee agreement?
• What happens if I lose the case with a contingency fee agreement?
• Contingency Fee Agreement Sample

What Is a Contingency Fee?

A contingency fee is a type of fee arrangement commonly used in legal cases, particularly in civil litigation and personal injury cases. Under a contingency fee agreement, an attorney agrees to represent a client without requiring upfront payment of legal fees. Instead, the attorney's fees are contingent on the successful outcome of the case. In other words, the attorney only gets paid if they win the case or achieve a favorable settlement on behalf of the client.

Here are the key characteristics of a contingency fee arrangement:

1. No Upfront Costs: Clients do not have to pay their attorney's fees at the beginning of the case, making legal representation accessible to individuals who may not have the financial means to hire an attorney otherwise.

2. Payment upon Success: The attorney's compensation is tied to the outcome of the case. If the client wins the case or receives a settlement, the attorney is entitled to a percentage (typically a predetermined percentage) of the award or settlement amount as their fee.

3. Percentage-Based: Contingency fees are usually calculated as a percentage of the monetary award or settlement. This percentage varies depending on the type of case and the complexity of the legal work but often ranges from 20% to 40% or more.

4. Risk for the Attorney: Since the attorney only gets paid if the case is successful, they bear the risk of not receiving any compensation if the case is lost.

Contingency fee arrangements are most commonly associated with personal injury cases, such as car accidents, medical malpractice, or slip and fall accidents, where injured individuals may not have the financial means to hire an attorney upfront. It allows them to pursue legal action without the burden of paying legal fees out of pocket.

It's important to note that while contingency fees make legal representation accessible, they can result in a significant portion of any monetary award or settlement going to the attorney. Clients should carefully review the terms of the contingency fee agreement, including the percentage fee and any additional costs or expenses, before entering into such an arrangement. Additionally, the specific rules governing contingency fee agreements can v

Contingency Fee Example

Let's go through a hypothetical example of a contingency fee arrangement in a personal injury case to illustrate how it works:

Scenario: Sarah is involved in a car accident, and she suffers injuries due to the negligence of another driver. She decides to hire a personal injury attorney, Lisa, to help her pursue a legal claim against the at-fault driver.

Contingency Fee Agreement: Sarah and Lisa enter into a contingency fee agreement with the following terms:

• Lisa's contingency fee is 30% of any monetary award or settlement Sarah receives as a result of the case.

• There are no upfront legal fees, and Sarah won't be responsible for paying Lisa any fees unless they win the case or achieve a favorable settlement.

Case Outcome: After a few months of negotiations and legal proceedings, Sarah's case is settled out of court. The settlement agreement states that Sarah will receive $50,000 in compensation for her injuries and related expenses.

Contingency Fee Calculation: Based on the contingency fee agreement, Lisa is entitled to 30% of the $50,000 settlement amount as her fee.

• Lisa's contingency fee = 30% of $50,000

• Lisa's fee = 0.30 * $50,000 = $15,000

Payment to Lisa: Since the case was successfully settled, Lisa will receive $15,000 as her legal fee. Sarah will receive the remaining $35,000 from the settlement after deducting Lisa's fee.

In this example, Sarah did not have to pay any upfront legal fees, and Lisa's compensation is directly tied to the successful outcome of the case. The contingency fee arrangement allowed Sarah to pursue her personal injury claim without incurring legal costs unless she received a favorable settlement. Keep in mind that the specific percentage and terms of contingency fee agreements can vary, so it's essential to discuss and agree upon the terms with your attorney before proceeding with legal representation.

What Is a Contingency Fee Agreement?

A Contingency Fee Agreement is a contract between an attorney and a client that outlines the terms and conditions under which the attorney will provide legal services. Specifically, it establishes the fee structure for the attorney's services, where the attorney's fees are contingent upon the successful outcome of the case. Contingency fee agreements are commonly used in personal injury cases, but they can also be employed in various other types of civil litigation.

Here are the key components typically found in a Contingency Fee Agreement:

1. Identification of Parties: The agreement should identify the attorney or law firm and the client, including their contact information.

2. Scope of Representation: Define the legal matter or case for which the attorney will provide services. This section outlines the nature of the legal work, such as personal injury, medical malpractice, or another type of civil case.

3. Contingency Fee Percentage: Specify the percentage of the client's recovery or monetary award that the attorney will receive as their fee. This percentage typically ranges from 20% to 40% but can vary depending on the complexity of the case and local regulations.

4. Expenses and Costs: Address whether the client will be responsible for covering litigation expenses and court costs, such as filing fees, expert witness fees, and photocopying expenses. Some contingency fee agreements stipulate that these costs will be deducted from the client's share of the recovery.

5. Payment Timing: Clarify when the attorney's fees will be paid. Typically, fees are due only if the client wins the case or achieves a favorable settlement. In some cases, the attorney's fees may be due at specific milestones during the case, such as after the case settles.

6. Termination Clause: Describe the circumstances under which either party can terminate the attorney-client relationship. This may include the client's right to terminate the attorney's representation at any time or the attorney's right to withdraw from the case under certain conditions.

7. Client's Responsibilities: Explain the client's responsibilities during the legal process, including cooperation with the attorney, providing necessary information, attending meetings and court appearances, and following the attorney's advice.

8. Alternative Fee Arrangements: Mention whether the attorney will consider alternative fee arrangements if the case does not result in a financial recovery, such as an hourly fee or a fixed fee.

9. Liability and Indemnification: Address any limits on the attorney's liability and provisions for indemnifying the attorney against claims arising from the case.

10. Dispute Resolution: Specify the procedures for resolving disputes or disagreements between the attorney and the client, which may include mediation or arbitration.

11. Governing Law: Indicate which jurisdiction's laws will govern the agreement.

12. Signatures: Provide space for both the attorney and the client to sign and date the agreement, indicating their acceptance of its terms.

Contingency fee agreements are designed to make legal representation accessible to clients who may not have the financial means to pay upfront legal fees. However, it's essential for both the attorney and the client to fully understand the terms of the agreement and for the attorney to adhere to ethical and legal requirements related to contingency fee arrangements in their jurisdiction. Consulting with a legal professional is advisable when entering into a contingency fee agreement.

What to Include in a Contingency Fee Agreement

A well-structured Contingency Fee Agreement is crucial to establish clear expectations between an attorney and a client in cases where the attorney's fees are contingent on the outcome of the case. Here are the key elements to include in a Contingency Fee Agreement:

1. Identification of Parties: Clearly state the names and contact information of both the attorney or law firm and the client.

2. Scope of Representation: Describe the legal matter for which the attorney will provide services, specifying the nature of the case, claims, or legal issues involved.

3. Contingency Fee Percentage: Clearly define the percentage of the client's recovery or monetary award that will serve as the attorney's fee. This is typically a predetermined percentage of the final settlement or judgment amount.

4. Expenses and Costs: Specify whether the client will be responsible for covering litigation expenses and court costs, such as filing fees, expert witness fees, photocopying, and other related expenses. Describe how these expenses will be handled, whether they will be deducted from the client's share of the recovery or paid separately.

5. Payment Timing: Explain when the attorney's fees will be due. Typically, the fees are contingent on a successful outcome, meaning they are only payable if the client wins the case or achieves a favorable settlement. Describe any provisions for payment at specific milestones or during the case, if applicable.

6. Termination Clause: Detail the circumstances under which either party can terminate the attorney-client relationship. This may include the client's right to terminate the attorney's representation at any time or the attorney's right to withdraw from the case under specific conditions.

7. Client's Responsibilities: Clearly state the client's responsibilities during the legal process, including their duty to cooperate with the attorney, provide necessary information, attend meetings and court appearances, and follow the attorney's advice.

8. Alternative Fee Arrangements: Mention whether the attorney will consider alternative fee arrangements if the case does not result in a financial recovery. This may include hourly billing or fixed fees.

9. Liability and Indemnification: Address any limits on the attorney's liability and provisions for indemnifying the attorney against claims or liability arising from the case.

10. Dispute Resolution: Specify the procedures for resolving disputes or disagreements between the attorney and the client. This may involve mediation, arbitration, or other alternative dispute resolution methods.

11. Governing Law: Indicate which jurisdiction's laws will govern the agreement and any disputes related to it.

12. Signatures: Provide space for both the attorney and the client to sign and date the agreement, indicating their acceptance of its terms.

13. Conflicts of Interest: Include a clause requiring the client to disclose any potential conflicts of interest or situations that may affect the attorney's ability to represent them effectively.

14. Attorney's Responsibilities: Outline the attorney's duties and obligations regarding the case, including their commitment to providing competent and diligent legal representation.

15. Client's Rights: Inform the client of their rights, including the right to seek independent legal advice before entering into the agreement.

16. Ethical and Legal Compliance: Ensure that the agreement adheres to ethical and legal requirements specific to contingency fee arrangements in the relevant jurisdiction.

17. Record Keeping: Address how records, case documents, and financial records will be maintained and made available to the client.

18. Confidentiality: Include a confidentiality clause to protect sensitive client information.

How Does a Contingency Fee Work?

A contingency fee arrangement is a method by which attorneys are compensated for their legal services based on the outcome of a case. Here's how a contingency fee works:

1. No Upfront Fees: In a contingency fee arrangement, the client does not have to pay the attorney any upfront fees for legal services. This feature makes legal representation accessible to individuals who may not have the financial means to hire an attorney and pay hourly rates or retainers.

2. Outcome-Dependent Compensation: Instead of billing the client by the hour, the attorney's compensation is contingent on the successful outcome of the case. This means that the attorney only receives payment if they win the case, secure a favorable settlement, or achieve a successful outcome on behalf of the client.

3. Percentage-Based Fee: The attorney and client agree upon a predetermined percentage of the client's recovery or monetary award that will serve as the attorney's fee. This percentage typically ranges from 20% to 40% of the final settlement or judgment amount, but the specific percentage can vary based on factors like the complexity of the case and local regulations.

4. Payment upon Success: If the client's case is successful, the attorney's fee is calculated as a percentage of the client's recovery. The attorney receives their fee directly from the funds obtained through a settlement or judgment.

5. Client's Share: After deducting the attorney's fee, the remaining portion of the recovery or settlement is the client's share. This amount is intended to compensate the client for their losses, damages, or claims.

6. No Fee if No Recovery: If the client's case is unsuccessful, and there is no recovery or settlement, the attorney does not receive any fee for their legal services. In essence, the attorney assumes the risk of not being compensated for their time and effort if the case is lost.

7. Litigation Expenses: While the attorney's fee is typically contingent on the outcome, litigation expenses, such as court filing fees, expert witness fees, and other costs related to the case, may or may not be covered by the attorney. The Contingency Fee Agreement should specify how these expenses will be handled, whether they will be deducted from the client's recovery or paid separately.

Contingency fee arrangements are commonly used in personal injury cases, such as car accidents, medical malpractice, and product liability cases. They allow injured individuals to pursue legal action without incurring financial risk, as they only pay legal fees if they are successful in obtaining compensation.

It's essential for clients to carefully review and understand the terms of the Contingency Fee Agreement, including the percentage-based fee, expenses, and any other provisions. Clients should also be aware of any ethical and legal regulations governing contingency fee arrangements in their jurisdiction. Consulting with an attorney and having a clear, written agreement in place is crucial to ensure both parties understand their rights and obligations in this fee structure.

How to Write a Contingency Fee Agreement

Writing a Contingency Fee Agreement requires careful consideration of the terms and conditions that will govern the attorney-client relationship, particularly when attorney fees are contingent on the outcome of the case. Here's a step-by-step guide to help you draft a Contingency Fee Agreement:

1. Title and Introduction:
   • Begin with a clear title, such as "Contingency Fee Agreement."
   • Include the names and contact information of both parties (the attorney/law firm and the client).
   • Specify the effective date of the agreement.

2. Scope of Representation:
   • Describe the legal matter for which the attorney will provide services, including the nature of the case, claims involved, and relevant facts.

3. Contingency Fee Percentage:
   • Clearly state the percentage of the client's recovery or settlement that will serve as the attorney's fee.
   • For example, "The attorney's fee shall be contingent on the successful outcome of the case and shall equal 33.33% (one-third) of the gross recovery obtained for the client."

4. Expenses and Costs:
   • Explain whether the client will be responsible for covering litigation expenses and court costs.
   • Specify how these expenses will be handled, such as whether they will be deducted from the client's recovery or paid separately.

5. Payment Timing:
   • Clarify when the attorney's fees will be due. Typically, fees are due only if the client wins the case or achieves a favorable settlement.
   • Include any provisions for payment at specific milestones or during the case, if applicable.

6. Termination Clause:
   • Detail the circumstances under which either party can terminate the attorney-client relationship. This may include the client's right to terminate at any time or the attorney's right to withdraw under specific conditions.

7. Client's Responsibilities:
   • Clearly state the client's responsibilities during the legal process, including their duty to cooperate with the attorney, provide necessary information, attend meetings, and follow the attorney's advice.

8. Alternative Fee Arrangements:
   • Mention whether the attorney will consider alternative fee arrangements if the case does not result in a financial recovery (e.g., hourly billing or fixed fees).

9. Liability and Indemnification:
   • Address any limits on the attorney's liability and provisions for indemnifying the attorney against claims or liability arising from the case.

10. Dispute Resolution:
    • Specify the procedures for resolving disputes or disagreements between the attorney and the client, which may involve mediation or arbitration.

11. Governing Law:
    • Indicate which jurisdiction's laws will govern the agreement and any disputes related to it.

12. Signatures:
    • Provide space for both the attorney and the client to sign and date the agreement, indicating their acceptance of its terms.

13. Confidentiality:
    • Include a clause emphasizing the confidentiality of the attorney-client relationship and the client's duty not to disclose sensitive information.

14. Record Keeping:
    • Address how records, case documents, and financial records will be maintained and made available to the client.

15. Conflicts of Interest:
    • Require the client to disclose any potential conflicts of interest or situations that may affect the attorney's ability to represent them effectively.

16. Attorney's Responsibilities:
    • Outline the attorney's duties and obligations regarding the case, including their commitment to providing competent and diligent legal representation.

17. Client's Rights:
    • Inform the client of their rights, including the right to seek independent legal advice before entering into the agreement.

18. Ethical and Legal Compliance:
    • Ensure that the agreement adheres to ethical and legal requirements specific to contingency fee arrangements in the relevant jurisdiction.

19. Client's Share:
    • Explain the client's share of the recovery, which is the portion intended to compensate the client for their losses, damages, or claims.

20. Conclusion:
    • Summarize the essential terms and conditions of the agreement.

FAQs

What is a contingency fee agreement?

A contingency fee agreement is a contract between an attorney and a client that outlines the terms of legal representation, where the attorney's fees are contingent on the successful outcome of the case. The attorney is only paid if they win the case or achieve a favorable settlement on behalf of the client.

What types of cases typically use contingency fee agreements?

Contingency fee agreements are commonly used in personal injury cases, including car accidents, medical malpractice, slip and fall accidents, and product liability cases. They may also be used in certain employment discrimination cases, class-action lawsuits, and other civil litigation matters.

How are attorney fees calculated in a contingency fee agreement?

Attorney fees in a contingency fee agreement are typically calculated as a predetermined percentage of the client's monetary recovery or settlement. The specific percentage can vary but often ranges from 20% to 40% or more, depending on factors like the complexity of the case and local regulations.

Do I have to pay upfront legal fees with a contingency fee agreement?

No, one of the primary benefits of a contingency fee agreement is that clients do not have to pay upfront legal fees. The attorney's fees are contingent on a successful outcome, meaning they are only payable if the client wins the case or achieves a favorable settlement.

What happens if I lose the case with a contingency fee agreement?

If you lose the case, you are typically not responsible for paying the attorney's fees. The attorney assumes the risk of not being compensated for their time and effort if the case is unsuccessful. However, you may still be responsible for covering certain litigation expenses, depending on the terms of the agreement.

Contingency Fee Agreement Sample