What are Contingent Fee Agreements?
The Details of a Contingent Fee Agreement
A contingency fee agreement is a written contract between the attorney and the client. The attorney’s fee for working the case is typically calculated as a percentage of any future court judgment or settlement related to the case.
The Pros and Cons of Contingent Fee Agreements
The most important benefit to this type of fee agreement is that it allows some clients to access the court system when they would not otherwise be able to afford an attorney. It also serves as a motivation to the attorney who needs to be successful in the case in order to get paid. Finally, it might serve a benefit to potential defendants and to the court system by weeding out cases that do not have a good likelihood of winning. Plaintiff attorneys are unlikely to assume the risk of working for free if they do not believe that they will be successful in the case. Attorneys who are paid by the hour, however, may be more willing to take a chance on a case without a strong likelihood of success.
On the other hand, contingency fee agreements may lead some attorneys to minimize the number of hours spent on cases for the greatest return. Further, they might end up costing clients more money than fixed fee agreements if the agreement is for a high percentage of their eventual recovery.
The Ethical Considerations of Contingent Fee Agreements
The American Bar Association’s Model Rules of Professional Responsibility allow attorneys to take into account whether a fee is fixed or contingent when they enter a fee agreement. Generally, attorneys can earn more pursuant to a contingency fee agreement because of the inherent risk in the fee arrangement and because of the delay in payment.
Finally, there are a few situations when contingency fees are prohibited. Those situations include domestic relations cases. For example, an attorney cannot represent a client under an agreement that makes the attorney’s fees contingent on a divorce being granted. Further, an attorney cannot represent a defendant in a criminal trial on a contingency basis.
Contingent fee agreements are important and helpful to many plaintiffs and plaintiff attorneys. However, in order for them to be ethical and legal they need to be explicit and reasonable.
The information on this page is meant to provide a general overview of the law. The laws in your state and/or city may deviate significantly from those described here. If you have specific questions related to your situation you should speak with a local attorney.