Contingency fee arrangement: Overview, definition and example
What is a contingency fee arrangement?
A contingency fee arrangement is an agreement between a client and a lawyer where the lawyer’s payment is based on the outcome of the case. Instead of charging upfront fees, the lawyer receives a percentage of the money recovered if the client wins the case. If the client loses, the lawyer typically doesn’t get paid.
This type of arrangement is common in cases like personal injury, employment disputes, or class actions, where the client might not have the resources to pay legal fees upfront.
Why is a contingency fee arrangement important?
A contingency fee arrangement is important because it provides access to legal representation for people who might not afford it otherwise. It aligns the lawyer’s interests with the client’s, as the lawyer only gets paid if the client succeeds. For clients, this can be a low-risk way to pursue a case, as they don’t need to pay legal fees unless they recover money.
For lawyers, the arrangement allows them to take on cases they believe in while sharing the financial risk with the client. However, these agreements also require clear communication about what percentage the lawyer will take, whether additional costs (like court fees) are included, and how payments are handled.
Understanding a contingency fee arrangement through an example
Imagine you’re injured in a car accident and want to file a lawsuit for damages against the at-fault driver. You hire a personal injury lawyer under a contingency fee arrangement. The agreement states that the lawyer will receive 30% of any settlement or court award. If you win $100,000, the lawyer will take $30,000 as their fee.
If the case is unsuccessful, you typically wouldn’t owe the lawyer any fees, although you might still be responsible for covering other costs, like filing fees or expert witness expenses, depending on the terms of the agreement. This arrangement helps you pursue justice without upfront costs while giving the lawyer an incentive to work hard on your behalf.
An example of a contingency fee arrangement clause
Here’s how a contingency fee clause might appear in an agreement:
“The Client agrees to pay the Attorney a contingency fee equal to [X]% of the total recovery obtained through settlement, judgment, or award. In the event of no recovery, the Client shall not owe the Attorney any fees, except for agreed-upon costs incurred during the representation, as outlined in this Agreement.”
Conclusion
A contingency fee arrangement makes legal services accessible to clients who might not otherwise afford them while motivating lawyers to achieve the best possible outcomes. It’s a practical and often fair way to share financial risk in legal disputes.
Understanding how contingency fees work ensures transparency and trust between clients and lawyers. Whether you’re entering into such an agreement or reviewing one, knowing the terms ensures both sides are clear on responsibilities and compensation.
This article contains general legal information and does not contain legal advice. Cobrief is not a law firm or a substitute for an attorney or law firm. The law is complex and changes often. For legal advice, please ask a lawyer.