A contingency fee is a payment to an attorney for legal representation and services that depends on money damages being recovered. It’s the popular “No win, No fee” model.
A contingency fee agreement is commonly utilized in the following types of cases:
- Personal Injury Cases – such as accidents involving cars and large trucks
- Cases involving property damage
- Cases where substantial monetary damages are at stake
- Class action lawsuits
Cases where contingency fee arrangements are not allowed include criminal cases, property settlement cases, child support cases, divorce cases, and alimony cases. Each state has its own laws governing the use of contingency fees. For instance, Kentucky explicitly prohibits contingent fees in domestic relations matters involving divorce, alimony, and property settlements.
A Contingency Fee Arrangement Differs from Hourly Billing
Contingency fee agreements are specific to civil law and are preferred in personal injury cases. Unlike traditional hourly billing, where lawyers bill clients for each hour worked, contingency fees are contingent upon winning the case. If no award is received, the client owes no fees or expenses.
Benefits of Contingency Fee Basis for Lawsuits
The primary advantage of a contingency fee arrangement is that it allows clients in personal injury cases to access legal representation without substantial upfront costs. Instead, the lawyer covers expenses like investigation, medical records, and expert witnesses. These costs are reimbursed only if the case is successful.
Paying the Attorney with a Contingent Fee Agreement
In a contingency fee arrangement, the law firm typically collects between 33% and 50% of the awarded damages if successful. This percentage reimburses the firm for time, resources, and expenses invested in the case. If the case is lost, the client owes nothing for attorney fees or expenses.
Understanding Contingency: How It Works
For example, Sharon and her family were severely injured in a truck accident. She consults a lawyer who offers a free case review and proposes a contingency fee agreement. They agree on a 40% fee if they win. If the case succeeds, Sharon will receive 60% of the compensation, minus expenses fronted by the lawyer.
In summary, a contingency fee arrangement allows clients to defer legal costs until a favorable outcome is achieved. If the case is unsuccessful, the client owes nothing, ensuring access to justice without financial risk.
You might hear “contingency fee” used like this, here’s what it means:
“We work on contingency. If we don’t win your case, you don’t pay.”
Translation: We operate under a contingency fee structure. If we are unsuccessful in securing a favorable outcome for your case, you will not be responsible for any payment to us.
“We can either bill you hourly or put you on a contingency agreement.”
Translation: We offer two billing options. We can bill you based on the hours spent on your case and itemize additional expenses. Alternatively, we can proceed under a contingency fee agreement, where our payment is contingent upon achieving a successful result in your case, with no upfront costs to you.
