What is a Contingency Fee? Contingent Fee Agreements Explained

A contingency fee is a payment that a client makes to an attorney only when the client receives monetary gain in court.

In personal injury cases, this means the client’s payment to the attorney is entirely contingent upon the client receiving some sort of monetary recovery.

The client would get monetary compensation either by winning the case at trial or if the defendant settles.

A contingency fee agreement helps ensure the client can pay for the services and prevents them from wasting their money.

In most cases and lawsuits, clients provide compensation to attorneys for their legal services.

While this fee-for-service protocol is set in a standard business model, it does not always account for the realities of the legal system.

Some clients might need representation without the means to pay.

Some cases might seem risky, and it’s possible that the client could have to spend money without receiving compensation in the end.

This is why contingency fees exist.

When Are Contingency Fee Agreements Used?

Contingency fee agreements are especially helpful in instances where a client is injured and in need of legal representation, but cannot financially cover attorney costs.

Contingency fee agreements can be found in many types of law, although they are most commonly used by workers’ compensation and personal injury lawyers.

Because lawyers’ compensation in these instances depends on the amount that their clients receive, they generally will not agree to a contingent fee unless they feel that a prospective client’s case has a strong chance of winning.

Because of this, they will usually consult with clients for free and evaluate their claims before agreeing to a contingent fee.

While contingent fees can present a risk for attorneys, they can also offer significant potential rewards.

One such example is NTP vs. Research in Motion. LTD.

In this case, a D.C. firm took on a patent infringement suit against the maker of Blackberry devices.

Though their payments were delayed until the end of the case, the firm eventually collected over $200 million in fees when the case was settled for $612.5 million.

What Are the Benefits of Contingency Fee Agreements?

Contingency fee agreements can provide many advantages for clients.

The main benefits being that they can access quality representation without needing extensive financial resources, and can avoid risking their money on cases that won’t yield them any compensation.

These arrangements also incentivize lawyers to fight for the largest possible awards for their clients, and by extension, themselves.

Say you are injured in a car accident, you slip and fall, or you’re a victim of battery or assault — any incident that causes you harm could mean you need legal representation.

Without the funds for an experienced personal injury lawyer, you would be out of luck.

Contingency fees foster a legally bound client and attorney agreement that ensures adequate representation and compensation.

How Do Attorneys Determine Contingency Fees?

The amount a personal injury lawyer receives with contingency fee agreements changes from case to case, and is dependent on many different factors.

It often comes down to the complexity and risk involved with a case, and who is paying for litigation costs and when.

While the percentage is not always the same, it is often around 40% of the recovery costs.

Of course, this percentage can vary depending on the nature of the case itself.

For example, if researching and preparing a particular case requires lawyers to put in an excessive amount of work hours, they may seek to negotiate a larger contingency fee with their client.

Attorneys may also require a larger contingency fee if they believe their client’s case is more likely to go to trial, rather than be settled out of court.

Although fairly uncommon in personal injury law, trials can be very costly for law firms, as they can increase risk and often require a significant amount of research and prep work.

What Costs Are Considered in Contingency Fee Agreements?  

In addition to labor and legal services, contingency fee agreements must account for a variety of other costs.

If there are more expenses associated with a case, attorneys will likely ask for a larger fee to address these costs.

There are several common types of legal expenses that attorneys consider when assessing contingency fees:

• Court and filing fees: All court cases come with fees. For example, filing a complaint in federal court costs around $400.

• Expert witnesses: Some personal injury lawsuits require expert witnesses at the trial to review the case, prepare a report, and testify. Expert witnesses charge high fees — often a few thousand dollars.

• Obtaining evidence: Evidence in personal injury cases, such as medical records and public document copies, is not always free to obtain.

• Discovery costs: Many cases require a “discovery phase” that can involve paid court reporters, insurance reports, deposition transcripts, and several hours of interrogations.

If attorneys believe that one or more of these expenses is necessary for a case, it will usually be reflected in their fee.

In many cases, these costs can be deducted from a client’s settlement or award if they win, leaving them with no out-of-pocket expenses to cover.

Types of Contingency Fee Agreements

Typically, there are two types of contingency fee agreements made between attorneys and their clients — contingency hourly agreements and mixed hourly contingent agreements.

Each of these variations has its distinct advantages, and you will need to discuss the specifics of your case with your attorney to determine the best option for you.

Contingency Hourly Arrangements  

When a contingency hourly arrangement is made, the client does not need to pay the attorney until monetary recovery occurs in a case.

The attorney keeps track of the hours they work on the case, and then the client pays an hourly rate.

For example — if the attorney charges $200 per hour and spends 10 hours on the case, then the client pays $2,000 if they win the case.

Mixed Hourly Contingent Arrangements  

Mixed hourly contingent arrangements require that the client pays a portion of the attorney’s hourly rate upfront, and the remainder is paid only if the attorney helps the client obtain a recovery.

For example — if the attorney charges $200 per hour, the client might only need to pay $50 an hour upfront.

The additional $150 would not need to be paid until a recovery is made.

Example of a Contingency Fee Agreement

Below is an abridged example of a contingency fee agreement that personal injury lawyers may use.

The exact rates attorneys receive will be dependent on the parameters of the case itself:

I agree to retain TorHoerman Law, LLC (THL) as my attorneys to represent me against *Individual, company, or entity being named* for injuries sustained from an incident that occurred on or about *Date of Injury*

THL compensation shall be contingent upon the result obtained.

There shall be no legal obligation by the Client to pay THL any fee if nothing is recovered from the adversary or from the Client’s insurer in an underinsured or uninsured situation.

My attorneys will receive as their fee *Contingency Fee Rate*  percent of the gross amount received by way of settlement.

If a lawsuit is filed, my attorneys will receive as their fee *Adjusted Rate* of the gross amount recovered.

THL will advance all expenses necessary for the case.

These may include court and filing fees, expert witness fees, and the cost of obtaining evidence such as medical records and police reports.

If I am awarded a settlement or favorable judgment in my case, these expenses will be deducted from the amount recovered and reimbursed to THL.

____________

Client Name

Do You Need To Be Represented on a Contingency Fee Basis?

Contingency fee agreements can be especially effective for those filing any type of personal injury lawsuit.

Personal injury lawsuits cover many compensatory damages.

If you have suffered damages monetarily, physically, or mentally and are considering a personal injury lawsuit, a contingency agreement can be the best method to guarantee financial gain.

At TorHoerman Law, personal injury is a large focus of our practice.

Our personal injury lawsuit legal team will ensure you have the best representation to receive compensation for your injury.

If you have any questions or were injured in an accident, contact us for a free consultation.

We are here to help.

No win, No fee

Contingency fee agreements can be especially effective for those filing any type of personal injury lawsuit.

Personal injury lawsuits cover many compensatory damages.

If you have suffered damages monetarily, physically, or mentally and are considering a personal injury lawsuit, a contingency agreement can be the best method to guarantee financial gain.

At TorHoerman Law, personal injury is our focus.

Our personal injury legal team will ensure you have the best representation to receive compensation for your injury.

If you have any questions or were injured in an accident, contact us for a free consultation.

We are here to help.