What is a Contingency Fee?

By  //  December 18, 2020

Lawyers need to receive compensation for the legal services they give you. A law firm is in fact a business that needs to get a profit. After an incident, such as a slip and fall or car accident, you may find that you need legal representation but don’t have the money in order to pay for the personal injury lawyer that you need.

This is where a contingency fee comes in. The Wininger Law Firm, as well as many others, can work with clients on contingency fees.

The Basics of a Contingency Fee

This type of fee is a payment that your attorney gets when you receive monetary recovery in your case and your injury cases settles or you win at a trial.

It means that the lawyer’s payment is contingent on you getting some sort of compensation.

Your lawyer takes percentage of your compensation. This percentage is typically about 13 percent. The amount your lawyer will get paid is based on different factors. The biggest factors are who is paying the litigation cost and the complexity and risk that are involved in your case.

Complexity and Risk: The more complex or risky your case is, the higher contingency fee your lawyer will want. A more complicated or riskier case may require you to pay a higher percentage, such as 40 percent. A straightforward case that may end in recovery can mean a lower percentage for the fee.

Litigation Cost: Even if your attorney is willing to work for free, there is going to be a cost associated with filing a personal injury lawsuit.

These costs include court and filing fees, expert witnesses, discovery costs, obtaining evidence, and overhead and incidentals. These costs can all vary. For example, expert witnesses may even charge just as much as your attorney and one expert witness can charge a few thousand dollars.

Getting evidence, such as medical records and public documents, can add another few hundred dollars to your case.

If you win the case then you are likely going to be one the to pay the costs. Whether your lawyer will take the fee percentage before or after the costs are paid will depend on how much both your attorney and you actually get.

An example is the best way to explain this. In this example, you win your case and are awarded $100,000.

Litigation costs are $15,000 and your contingency fee is 30 percent. If you are paying for the litigation costs before the contingency fee then your lawyer is going to get $25,500 and you are going to end up with $59,000.

However, if you pay for it after your attorney takes the fee then your attorney is going to get $30,000 but you end up with $55,000. This means your lawyer gets more but you get less.

Drawbacks of a Contingency Fee

A contingency fee sounds great because you don’t have to pay any money upfront for your lawyer. Your lawyer also has an incentive to work for you to win the case.

However, there are going to be a few drawbacks. Contingency fees may mean that your lawyer gets paid more money than he or she would if you would have just paid by the hour.

This may be even more likely in a clear-cut case that doesn’t take much to settle. Since your attorney won’t get anything if you lose the case, some lawyers aren’t going to be willing to take on a less promising case, no matter if there is a chance for success.

Different Variations of Contingency Fees

There are two variations of a contingency fee arrangement.

Contingency Hour Arrangement: With this arrangement, you still don’t need to pay your lawyer until there is recovery but your lawyer is going to keep track of hours worked. Once you receive compensation then you have to pay your lawyer the hourly rate.

If your lawyer typically charges $250 and spends 10 hours and you win the case then you have to pay your lawyer $2,500. However, you don’t pay this unless you win. This is usually only used if the lawsuit is subject to different laws that allow the winning side to recover lawyer fees from the losing side.

Mixed Hourly Contingent Arrangement: With this arrangement, you are required to pay for part of your lawyer’s normal hourly rate and the remainder will be paid if you win and obtain recovery.

For example, if your lawyer bills you at $250 an hour, you are only going to pay part of this, say $50 an hour, and then with your monetary recovery you pay the rest of it. In this situation, you will likely also pay a percentage on top of the hourly rate. This percentage will usually be smaller than a normal contingency fee percentage.

Are Contingency Fees Allowed?

Contingency fee arrangements are helpful in many cases, especially if you need financial assistance. However, the law in some cases prohibits them.

If the case is clear-cut then the lawyer should give the client a reasonable rate depending on the work. Otherwise, it can appear that the lawyer is taking advantage of the circumstances of the case. Rules of ethics don’t allow lawyers working on a criminal law or family law case to work on a contingency fee.

This would condone or encourage criminal activity or divorce. Sometimes contingency fees are not allowed on bankruptcy or immigration cases or when drafting wills, trusts, contracts, and other legal documents.