Understanding Contingency Fee Agreements

When pursuing a lawsuit, there are different types of fee agreements (or contracts) that may be used when signing up with an attorney. The type of fee agreement used will vary on the type of case, what is trying to be accomplished, and the preference of the attorney that is handling the lawsuit. A common fee agreement that is used is a contingency fee agreement.

What is a contingency fee agreement?

A type of fee agreement that states the client and attorney will only receive compensation if the lawyer successfully handles the case. If the attorney wins the case, the attorney fees and case expenses are paid from the money that is awarded during the trial or settlement. If the attorney loses the case, neither party will receive money, but the client is not required to pay the attorney for the work they have done on the case.

When is a contingency fee agreement used?

Contingency fee agreements are often used in cases where an attorney is trying to claim money on their client’s behalf. The most common uses of contingency fee agreements are:

  • Personal injury (car accidents, work accidents, defective products)
  • Nursing home or medical malpractice
  • Fair Debt Collection Practices Act (FDCPA) violations against creditors for harassing debtors

Contingency fee agreements may also be used in the following cases:

  • Collection of large debts
  • Business litigation
  • Employment law and hourly wage issues
  • Real estate

Generally, contingency fee agreements are not used in the following areas:

  • Bankruptcy
  • Starting a business
  • Registering a trademark, copyright, or a patent
  • Drafting a will, trust, contract, or other legal documents
  • Immigration
  • Adoption
  • Divorce and similar family law issues
  • Criminal defense (DUI, traffic, drug, and other charges

What does it cost the client?

Contingency fee agreements are unique in the fact that there are no up-front costs to the client. The attorney will cover any expenses that may be incurred while pursuing the case. If the case is won, the attorney’s fees and case expenses will be deducted from the money that is awarded to the client. The average contingency fee is 40%.


It is important to remember that contingency fee agreements are not the right fit for every case. The type of fee agreement that is used will depend on the individual facts and circumstances of each potential case.

 


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