Surviving a Lawsuit: Role of Contingency Fee Agreements

Updated September 5, 2023

14 min read

Introduction

The Role of a Contingency Fee Agreement

The Pros and Cons of a Contingency Fee Agreement

Who Needs a Contingency Fee Agreement?

Understanding the Costs of a Contingency Fee Agreement

Conclusion

Surviving a Lawsuit: Role of Contingency Fee Agreements

Introduction

Stepping into the complex, harrowing world of lawsuits can feel akin to venturing into an unknown wilderness. Navigating through legalese, understanding proceedings, seeking favorable resolutions — it can all be highly overwhelming. However, there is a tool designed to make this journey accessible and less burdensome — the contingency fee agreement.

It's a contract that aligns the interests of an attorney with their client, enabling access to legal representation for those who might otherwise be unable to afford it. This article provides a detailed review of the main functions, components, benefits, and risks of the contingency fee agreement and will help you to understand whether this is an option you are searching for.

The Role of a Contingency Fee Agreement

A contingency fee agreement is essentially a financial arrangement with your lawyer where legal fees are contingent on the outcome of the case. A standard contingency fee agreement implies that attorney fees are based on a percentage of the monetary relief that the client receives through the lawsuit.

The essential components of a contingency fee agreement

A sample contingency fee agreement can provide a blueprint and guide your understanding of how these components fit together cohesively. A well-crafted contingency fee agreement template includes:

Scope of representation: This section clearly defines the specific services the attorney will provide for the client within the context of the case.
Method of calculating attorney fees: The contingency fee agreement outlines how the attorney's fees will be determined, usually based on a percentage of the monetary recovery obtained for the client.
Delineation of costs and expenses: The contingency fee agreement sets out the various expenses that may be incurred during the legal process, such as court fees, expert witness fees, and other necessary costs.

Understanding and incorporating these components into a contingency fee agreement ensures clarity and transparency in the attorney-client relationship and fosters a solid foundation for effective legal representation.

The Pros and Cons of a Contingency Fee Agreement

Liability lawsuits, whirling around injuries and damages, can often be a legal hodgepodge. Here, contingency fee agreements step in as an oasis amidst the chaos.

The benefits of a contingency fee agreement

A contingency fee agreement has numerous benefits for you and your lawyer. It allows you to seek justice without pondering over immediate legal expenses and creates a sense of mutual trust, as your lawyer stands to gain only if you do, thus solidifying the dedication towards your case. Here are the key benefits of this type of agreement:

No upfront costs: This is particularly beneficial for clients who might not have the financial means to pay hourly fees or a lump sum. The contingency fee agreement makes it possible for everyone, regardless of their financial situation, to seek legal representation.
Aligns lawyer's interests with those of clients: Since the attorneys only get paid if they win the case, they tend to fight vigorously for their clients. Their payment relies on the success of the case, which encourages determination and thoroughness.
Flexibility and easy access to legal assistance: A contingency fee agreement gives people the flexibility to hire competent lawyers even if they can't afford their usual hourly rates. As a result, it offers broader access to legal assistance.
Protects against financial losses: If the case is unsuccessful, the client doesn't owe the attorney a fee. The contingency fee agreement reduces the financial risks for clients while seeking legal representation.
Performance-based payment: The contingency fee agreementIt motivates attorneys to devote their best efforts to the case as their payment directly correlates with the compensation their clients acquire.
Limits frivolous litigation: Since, according to the contingency fee agreement, a lawyer's payment depends on the success of the case, they are more likely to only take on cases they believe have a solid chance of winning

The drawbacks of engaging in a contingency fee agreement

A contingency fee agreement can significantly minimize upfront costs. However, there are notable drawbacks worth considering. Let's examine some of these potential pitfalls.

Setting unreasonable expectations: Due to the contingency fee agreement structure, where the attorneys don't get paid until they win the case, clients can sometimes fall into thinking victory is almost guaranteed.
Higher costs in the long run: The structure of a contingency fee agreement implies that the attorney will take a percentage of the winnings if the case is successful. This can sometimes lead to clients paying more than they would have under an hourly billing method. For cases with sizable settlement or award amounts, the proportion directed towards attorney fees can create financial burdens for clients.
Case selection bias: Lawyers signing the contingency fee agreement often choose high-reward, high-probability cases, leaving those with more complex or risky issues potentially underserved. This selectivity may hinder access to legal services for clients whose cases are deemed less likely to result in a favorable outcome.
Potential for rushed settlements: A controversy surrounding contingency fee agreements revolves around the potential for attorneys to rush toward a quick settlement. If lawyers are primarily motivated by getting paid from the settlement, they might forgo the effort necessary to genuinely seek the best possible deal for their clients.
Intrinsic conflict of interests: Since the lawyer only gets paid if the case wins, their interests may not always align perfectly with those of their clients signing the contingency fee agreement. There can be instances where the lawyer's focus on obtaining a successful outcome might compromise the quality of their client's legal representation.

In consideration of these drawbacks, both lawyers and clients should examine the entire framework of a contingency fee agreement before engagement. To ensure that the agreement revolves around promoting your best interests, consult reliable sources and seek for a piece of advice from professional lawyers.

Who Needs a Contingency Fee Agreement?

A contingency fee agreement is an arrangement typically used in legal matters, wherein the lawyer does not get paid unless they win the case and get a percentage of the settlement or money awarded to the client. This type of agreement can be useful for various individuals, such as:

Individuals involved in personal injury cases;
Clients in workers' compensation or employment law cases;
Victims of medical malpractice;
Individuals pursuing class action lawsuits;
Clients in civil rights cases;
Individuals involved in wrongful death lawsuits; and
Clients in legal malpractice suits.

Remember, while a contingency fee agreement can be beneficial in reducing upfront costs, it is essential to fully understand the terms and make sure they are fair and reasonable.

Understanding the Costs of a Contingency Fee Agreement

Typically, the lawyer's fee in a contingency agreement is calculated as a percentage of the client's recovery. However, understanding the 'when' and 'how much' of this deducement is crucial. And while contingency fee agreements result in no upfront attorney fees, they don't categorically rule out other costs, like court filing fees or expert witness fees.

Key terms and conditions typically found in a contingency fee agreement

A contingency fee agreement is a legal document that contains a set of essential terms you should understand:

Definition of сontingency agreement: A contingency fee agreement is a document outlining the financial agreement between an attorney and a client, in which the attorney's fees are dependent on a positive financial outcome for the client.
Scope of representation: In a contingency fee agreement, this determines the specific legal services the attorney will provide based on the agreement.
Contingency fee percentage: This is the percentage of the successful outcome that the attorney will collect as their fee. The percentage can vary based on the law, the type of case, or negotiations between the attorney and the client stated in the contingency fee agreement.
Calculation of the contingency fee: The contingency fee agreement often includes detailed provisions on how the contingency fee will be calculated. It may specify whether the percentage is taken from the gross recovery (total award before out-of-pocket costs) or the net recovery (total award after costs).
Costs and expenses: These expenses that are not listed in the contingency fee agreement can include court costs, expert witness fees, investigation costs, and administrative expenses.
Payment in cases of winning, losing, or settlement: An essential aspect of every contingency fee agreement is the provisions that detail what happens based on different case outcomes.
Termination of representation: This section of the contingency fee agreement covers how a client can end the agreement, what happens with fees and costs upon termination, and under what circumstances the attorney may withdraw from the case. In case any additional agreements are required, you can use one of the available business templates.

Conclusion

Surviving a lawsuit can be an overwhelming journey, compounded by stress and numerous intricacies of the legal system. Amidst these challenges, contingency fee agreements can provide a beacon of hope. These agreements represent a partnership between the attorney and client, where they share the risks as well as the potential success of the case. They empower citizens to wage a legal battle, disregarding the constraints of financial limitations and thus upholding a fundamental tenet of democracy: that justice is accessible to all.

Article by

Alina Kalyna

Lawrina

Alina Kalyna is the Content Specialist at Lawrina. With her experience in content creation, Alina is adept at producing comprehensive and engaging content across various platforms. Her role at Lawrina involves generating high-quality content for the blog, guides, and other materials.

Known for her meticulous eye for detail and in-depth understanding of legal topics, Alina contributes to making legal understanding more accessible through her effective content.

Frequently Asked Questions

How does a contingency fee agreement work?

In U.S. law, a contingency fee agreement creates a direct connection between the attorney's fees and the outcome of the case. This connection is based on a principle that if the lawyer doesn't successfully win or settle your case, they do not receive any payment for their legal services.

The payment, when due, typically comes as a predetermined percentage of the compensation or settlement amount awarded to the client. For instance, under the Private Securities Litigation Reform Act of 1995, attorneys handling securities fraud lawsuits often set a contingency fee between 20% to 30% of the recovered amount.

Are there any hidden costs in a contingency fee agreement?

While a contingency fee agreement can mitigate the burden of attorney fees, it doesn't necessarily cover other costs associated with the lawsuit. These costs might include filing fees, costs for expert witnesses, or court reporter expenses.

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

In a contingency fee agreement, typically, if you lose your case, you are not obligated to pay any attorney fees. However, depending on your agreement, you might still be responsible for other legal expenses.

Can I terminate a contingency fee agreement prematurely? If yes, how?

Yes, you can terminate a contingency fee agreement prematurely, usually by adhering to the exit clause in the contract. The termination process should be clearly outlined in the agreement, and any fees or costs incurred until the termination might still be your responsibility.

All these answers may vary depending on the state and should be discussed during a consultation.