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What Is a Contingency Fee?

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  • Written By: Mary McMahon
  • Edited By: O. Wallace
  • Last Modified Date: 15 August 2014
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A contingency fee is a fee which a lawyer only earns by successfully winning a case. Some lawyers will make contingency fee agreements for cases in which monetary damages will be awarded, such as personal injury suits. Allowing lawyers to accept payments on a contingency basis can create more access to the legal system for people who do not have enough money to hire a lawyer outright. However, it is possible to get into a contingency fee arrangement which is not beneficial for the client, making it important to read the terms carefully.

The specifics of the contract can vary. Generally, the terms of the agreement state that the lawyer gets a percentage, with a third being a common amount, of the net earnings recovered. To determine net earnings, costs for court filings and other costs related to the suit are deducted, as are the costs for the lawyer's billable hours; the lawyer both earns a percentage and regular compensation for hours worked on the case.

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A lawyer will review a case carefully before accepting it on a contingent basis. As a general rule, lawyers only pick cases which they feel confident about winning when their compensation comes in the form of a contingency fee, because they do not want to put time and energy into a case with an uncertain outcome. This means that people who need access to the legal system but have complicated cases may not be able to get a lawyer to take the case on for a contingency fee, because there may be some doubt about the probability of a successful outcome.

When a client and lawyer agree to work together for a contingency fee, a contract will be written up to spell out the terms of the agreement. The client should review the contract carefully. If it is not clear or the client has questions, the client should seek out explanations. People should not sign contracts which appear to violate the law, which contain clauses they do not understand, or which do not appear to be favorable for them.

People should also be aware that many regional bar associations regulate how and when contingency fees can be used. These organizations consider excessive percentages to be a violation of ethics, and will penalize member attorneys who attempt to create an unreasonable contingency fee contract. Information about contingency fees is available directly from many bar associations, often on their websites, and it is advisable to look this over while developing a contract with a lawyer.

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