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What is a Contingency Attorney Fee?

A “contingency fee” is a retainer arrangement in which the lawyer only gets paid if he wins. Under this arrangement, the lawyer gets a certain percentage (typically one-quarter to one-third) of the money he or she wins for the client. In other words, the attorney get a piece of the prize. If the case is lost, neither the attorney nor the client get paid.

Lawyers typically only offer contingency fee arrangements where the client seeks to recover money. Contrary to popular belief, contingency fees are only common in a few areas of law, including personal injury, products liability, Workers’ Compensation, and Social Security Disability Insurance.

What are the Benefits of Contingency Fees for Clients?

From a client’s perspective, the primary advantage of a contingency fee is not having to pay to hire the lawyer. This allows a client to retain a lawyer that otherwise may have been unaffordable.

Another advantage is that the client does not have to worry about receiving a large bill if the attorney loses the case. This relieves a lot of stress for the client while the case is pending.

The last advantage for the client is that the attorney may be more motivated to win the case. The attorney will not get paid unless the case is won – just like the client. This mutual risk helps the client feel more confident that the attorney is doing a good job, which can also reduce stress.

What are the Disadvantages of Contingency Fees for Clients?

Unfortunately, contingency fee arrangements also come with disadvantages for clients. One major disadvantage is that prospective lawyers are usually more selective in the cases that they take for a contingency fee. Attorneys obviously want to get paid, so they are typically less willing to take risky cases on a contingency fee basis. This may make it more difficult for a client to hire an attorney.

Another disadvantage is that, if the case is won, the client may ultimately pay more in contingency fees than if the case had been taken on an hourly basis. For example, if an attorney performs 10 hours of work and settles a case for $300,000, the attorney would get $100,000 in fees under a one-third contingency retainer. In that same example, the attorney only would have received $5,000 in fees under a $500 hourly rate retainer.

Pros and Cons of Contingency Fees