Updated on February 23rd, 2023
A contingency fee agreement is a contract that states that an attorney will be paid for their services if the case is won or settled. The document will state the legal matter at hand and what percentage of the judgment or settlement the attorney will receive should they win the case. The agreement may also include a clause to ensure that the attorney will still receive compensation if their client chooses to change representation.
Contingency Fee, Explained
Definition: “a fee for services (as of a lawyer) paid upon successful completion of the services and usually calculated as a percentage of the gain realized for the client.”
A contingency fee is the amount of a client’s settlement or judgment their attorney will receive upon the successful handling of their case. This agreement helps to ensure that an injured party can receive proper legal representation regardless of their financial status. If the client loses their case, neither party will receive any money, and the client will not need to pay attorney fees; however, they may still be required to pay court filing fees.
Benefits of Contingency Fees
There are many benefits to using a contingency fee agreement, particularly in personal injury cases, which are often lengthy and costly.
- The client can avoid costly upfront attorney fees, especially if the case takes years to settle.
- The client will not have to pay the attorney if the case is unsuccessful.
- It incentivizes the attorney to get the best settlement as quickly as possible.
A contingency fee agreement offers benefits to the attorney in that:
- It allows the attorney to move forward with subpoenas, depositions, or other actions that a client paying legal fees may wish to forgo.
- The attorney can serve clients and take potentially lucrative cases that the client may not otherwise be able to afford.
Disadvantages of Contingency Fees
Despite the advantages a contingency fee may offer an injured party, there are some drawbacks, such as:
- A contingency may cost the client more than an attorney’s standard hourly rate.
- It may be more difficult for clients to find representation if their case is complex.
- If the client chooses to change their attorney before the case ends, they often have to pay their former attorney’s fees and expenses.
- The contingency fee may not cover disbursements such as court filing fees, transcript costs, expert witnesses, etc., in the event of a loss.
Contingency fee agreements are potentially risky for the attorney in that:
- If the attorney loses the case, they will not be compensated.
- The attorney may have to front substantial disbursements and time commitments for years before winning or settling the case.
- Some states have damage caps which may limit the attorney’s potential earnings.
Standard Attorney Contingency Fees
A contingency fee may vary greatly depending on the nature of the case, the attorney’s experience, and the amount of anticipated work the attorney may face. A client may negotiate with their representative to determine a suitable fee structure.
Fixed Percentage Fee
This is an agreement where the legal representative will receive a fixed percentage of the client’s gains, no matter when the case is resolved. Generally, the client can expect to pay one-third of their award to their attorney. This fee can reach up to 50% in more complex cases.
Sometimes, the contingency fee may be on a sliding scale, and the percentage paid to the attorney increases or decreases depending on how long the case lasts and whether the case settles before trial. This is also referred to as a staged contingency fee.
The agreement may involve a partial fee where the client agrees to pay for some initial or ongoing legal services and a contingency fee when the case is resolved.
Download: PDF, Word (.docx), OpenDocument
CONTINGENCY FEE AGREEMENT
1. THE PARTIES. This Contingency Fee Agreement (the “Agreement”) is made effective as of [MM/DD/YYYY] by and between:
Attorney: [ATTORNEY NAME] with a mailing address of [ATTORNEY ADDRESS] (the “Attorney”), and
Client: [CLIENT NAME] with a mailing address of [CLIENT ADDRESS] (the “Client”).
2. LEGAL MATTER. The undersigned Client hereby retains the Attorney in regard to the following: [DESCRIBE LEGAL MATTER] (the “Legal Matter”).
3. RETAINER. As part of this Agreement, the Client: (check one)
☐ – Shall pay a retainer in the amount of $[RETAINER AMOUNT]. Should a retainer be paid, it shall be deducted from any contingency fee paid by the Client as stated in Section 4 of this Agreement.
☐ – Shall not pay a retainer.
4. CONTINGENCY FEE. It is understood and agreed that the Client will pay the Attorney the following fee for the Legal Matter to be rendered:
[%] of any and all sums recovered by way of settlement prior to instituting a lawsuit.
[%] of any and all sums recovered either as a result of a trial or settlement after a lawsuit has been filed.
[%] of any and all sums recovered if any judgment is appealed, either on behalf of the Client or by any adverse party, or if garnishment or any proceeding after judgment has to be brought to collect the judgment or any portion thereof.
[%] of any and all sums recovered if the matter is the subject of a retrial as ordered by a trial or appellate court.
5. ATTORNEY REMOVAL. If the Client requests to change attorneys or otherwise requires the Attorney to withdraw from the case, the Attorney shall be entitled to the fees included in Section 4 based upon any settlement offered by the opposing party prior to the withdrawal date. If no settlement offer has been made, the Attorney’s hourly rate of $[RATE]/hour shall be paid.
6. LIEN. The Client agrees to give the Attorney a lien on the claims or causes of action and on a sum recovered by way of settlement and on any judgment that may be recovered thereon to the extent of the amounts herein provided as the Attorney’s fees and other fees, charges, and expenses incurred. It is further agreed that the Attorney shall have all general, possessory, or retaining liens and all special or charging liens known to the common law or available under law.
7. CLIENT’S DECISION. The Client has the ultimate right to decide whether or not an offer of settlement is satisfactory. If the Client and the Attorney cannot agree to a settlement of the case, the Attorney may withdraw from the case and will be paid the fees stated in Section 4 up to the withdrawal date.
8. CLIENT NOTIFICATION. The Attorney agrees to promptly notify the Client upon receiving a settlement offer, the amount of the offer, and the Attorney’s recommendation on whether the offer should be accepted. Additionally, the Client agrees to make no compromise or settlement in the matter without the approval of the Attorney and shall notify the Attorney of any offers of settlement that have been received.
9. CLIENT AUTHORIZATION. The Client hereby authorizes the Attorney to thoroughly investigate the facts and laws relative to the Legal Matter.
10. GOVERNING LAW. This Agreement shall be governed under the laws in the State of [STATE NAME].
11. ADDITIONAL TERMS AND CONDITIONS.
[ADD ANY ADDITIONAL TERMS AND CONDITIONS HERE].
IN WITNESS WHEREOF, the parties hereto have executed this Agreement on the dates written hereunder.
Attorney’s Signature: ______________________ Date: [MM/DD/YYYY]
Print Name: [ATTORNEY NAME]
Client’s Signature: ______________________ Date: [MM/DD/YYYY]
Print Name [CLIENT NAME]