A Contingency Fee Agreement is a legal contract between a client and an attorney, where the attorney’s payment is contingent upon winning the case or securing a settlement. Instead of charging upfront or hourly fees, the attorney receives a percentage of the recovered amount if the case is successful.

This type of agreement is commonly used in personal injury lawsuits, employment disputes, medical malpractice cases, and class-action lawsuits. It allows clients who may not afford upfront legal costs to pursue justice while ensuring that attorneys are incentivized to achieve the best possible outcome.

This guide will cover what a Contingency Fee Agreement is, why it’s important, key components, how to draft one, common challenges, and its benefits. Whether you are an attorney offering legal services or a client seeking representation, understanding contingency fee agreements is essential.

Table of Contents

1. What is a Contingency Fee Agreement?
2. Why is a Contingency Fee Agreement Important?
3. Key Components of a Contingency Fee Agreement
4. How to Draft a Contingency Fee Agreement
5. Common Challenges and How to Address Them
6. Who Needs a Contingency Fee Agreement?
7. When Should a Contingency Fee Agreement Be Used?
8. Advantages of a Contingency Fee Agreement
9. FAQs About Contingency Fee Agreements

What is a Contingency Fee Agreement?

A Contingency Fee Agreement is a legal contract where an attorney agrees to take a case with no upfront payment, instead earning a percentage of the final settlement or court award.

This agreement is commonly used in:

• Personal injury cases (car accidents, slip and fall claims).
• Medical malpractice lawsuits.
• Employment disputes (wrongful termination, discrimination claims).
• Workers’ compensation claims.
• Class-action lawsuits and mass tort cases.

The standard contingency fee typically ranges between 25% and 40% of the recovered amount, depending on the complexity of the case.

Why is a Contingency Fee Agreement Important?

1. Provides Access to Legal Representation

Clients who cannot afford upfront legal fees can still seek justice.

2. Motivates Attorneys to Win the Case

Lawyers are financially invested in the outcome, increasing their dedication to winning.

3. Reduces Financial Risk for Clients

Clients do not pay legal fees unless they win or settle the case.

4. Aligns Attorney and Client Interests

Both parties benefit when the case results in a favorable outcome.

5. Ensures Transparency in Legal Costs

The agreement clearly states how fees will be calculated and deducted.

Key Components of a Contingency Fee Agreement

1. Identification of Parties

• Names and contact details of the attorney and the client.

2. Scope of Legal Services

• Defines the nature of the case (e.g., personal injury, wrongful termination, medical malpractice).

3. Contingency Fee Percentage

• Specifies the percentage the attorney will receive (typically between 25%–40%).
• States if the percentage changes based on settlement vs. trial outcome.

4. Payment of Case Expenses

• Explains whether court fees, expert witness costs, and filing fees will be deducted from the settlement.

5. Responsibilities of the Attorney and Client

• Attorney agrees to provide legal representation and handle negotiations.
• Client agrees to cooperate and provide necessary documents.

6. Case Outcome and Payment Terms

• Defines what happens if the case is won, lost, or settled out of court.
• Explains how funds will be disbursed and deductions for expenses.

7. Termination Clause

• Outlines conditions where either party can terminate the agreement.
• Specifies what happens if the client switches attorneys mid-case.

8. Governing Law

• States which state’s laws apply to the agreement.

How to Draft a Contingency Fee Agreement

Step 1: Define the Legal Case Clearly

• Describe the case type (personal injury, employment law, etc.).
• Explain the expected legal process.

Step 2: Specify the Attorney’s Payment Structure

• Clearly state the percentage fee and any conditional variations.
• Explain how litigation costs will be handled.

Step 3: Include a Termination Clause

• Define how the contract can be ended by either party.
• State whether the attorney will be compensated for time spent if terminated early.

Step 4: Ensure Legal Compliance

• Ensure the contract complies with state bar regulations and ethical guidelines.

Step 5: Obtain Signatures from Both Parties

• Both the attorney and client must sign and date the agreement for validity.

Common Challenges and How to Address Them

Disputes Over Fee Percentage

Solution: Clearly outline fee structures and deductions upfront.

Client Disagreement on Settlement Amount

Solution: Specify how settlement decisions will be made and client rights.

Unexpected Legal Expenses

Solution: Define which costs are covered by the client and which are included in the contingency fee.

Attorney Withdrawal Mid-Case

Solution: Include terms for attorney withdrawal and replacement conditions.

Who Needs a Contingency Fee Agreement?

• Clients filing lawsuits who cannot afford upfront legal costs.
• Attorneys handling personal injury, employment, and medical malpractice cases.
• Law firms working on high-stakes civil litigation cases.
• Individuals seeking compensation in class-action lawsuits.

When Should a Contingency Fee Agreement Be Used?

• When an individual seeks legal representation for a compensation claim.
• When an attorney agrees to take a case without upfront payment.
• When a legal case has strong chances of success with potential high compensation.

Advantages of a Contingency Fee Agreement

• Allows clients to pursue legal claims without financial barriers.
• Motivates attorneys to work diligently for a successful outcome.
• Reduces client risk, as fees are only paid if the case is won.
• Encourages fair settlements, as lawyers aim for higher compensation.

FAQs About Contingency Fee Agreements

1. How much do lawyers charge in contingency fee cases?

Typically 25%–40% of the total settlement, depending on the case type and complexity.

2. Do clients have to pay expenses if they lose the case?

It depends on the agreement—some contracts require clients to cover court costs even if they lose.

3. Are contingency fees allowed for all legal cases?

No, criminal defense and divorce cases usually do not allow contingency fee arrangements.

4. Can a client negotiate a contingency fee?

Yes, clients can discuss fee percentages and expense deductions before signing.

A Contingency Fee Agreement ensures fair attorney compensation while providing clients access to legal representation without upfront costs. Download our free template today to create a structured and legally sound agreement!

Contingency Fee Agreement Sample