If you’ve been injured and are considering hiring a personal injury lawyer, you’ve likely come across the term contingency fee agreement. This fee arrangement is common in personal injury cases and allows clients to hire a lawyer without paying any upfront costs. Instead, the lawyer is only paid if they successfully recover compensation on your behalf.
In this article, we’ll explain what a contingency fee agreement is, how it works, and what you should consider before entering into one with a personal injury lawyer.
1. What Is a Contingency Fee Agreement?
A contingency fee agreement is a payment arrangement between a lawyer and their client, where the lawyer’s fee is contingent upon (or dependent on) the outcome of the case. Under this type of agreement, the lawyer only gets paid if they successfully recover compensation for the client, either through a settlement or a court judgment. If the lawyer doesn’t win the case, the client typically does not owe any attorney fees.
Key features of a contingency fee agreement:
- No upfront costs: The client doesn’t have to pay any money to the lawyer when the case begins.
- Payment is a percentage of the compensation: The lawyer’s fee is usually a percentage of the amount recovered, typically ranging from 25% to 40%.
- No fee if the case is lost: If the lawyer doesn’t recover compensation, they typically don’t charge any attorney fees, though some case-related expenses may still need to be paid.
Why it matters:
A contingency fee agreement makes legal representation accessible to people who may not have the financial means to pay a lawyer upfront. It allows injured individuals to pursue justice and compensation without worrying about legal fees unless they win their case.
Key takeaway:
A contingency fee agreement allows you to hire a personal injury lawyer without paying any upfront costs, and the lawyer only gets paid if you win your case.
2. How Does a Contingency Fee Agreement Work?
When you enter into a contingency fee agreement, you and your lawyer agree on the percentage of the compensation that the lawyer will receive if your case is successful. This percentage is usually based on the complexity of the case and the amount of work the lawyer anticipates.
How the process works:
- Initial consultation: During the first meeting, the lawyer will evaluate your case and explain the terms of the contingency fee agreement, including the percentage they will take if they win.
- Case investigation: The lawyer will investigate your case, gather evidence, negotiate with insurance companies, and, if necessary, prepare for trial.
- Settlement or trial: If your lawyer negotiates a settlement or wins at trial, they will take their agreed-upon percentage from the compensation you receive.
- Payment of attorney’s fees and costs: Once the compensation is awarded, the lawyer’s fee is deducted from the total amount, and the remaining funds are given to you.
Example of a contingency fee:
If your lawyer takes a 33% contingency fee and you win a $100,000 settlement, the lawyer would receive $33,000, and you would keep $67,000.
Why it matters:
A contingency fee arrangement aligns the interests of the lawyer and the client. The lawyer is motivated to maximize your compensation since their payment depends on it.
Key takeaway:
Under a contingency fee agreement, the lawyer is paid a percentage of the compensation if they win the case, and the client does not have to pay anything upfront.
3. What Percentage Do Lawyers Typically Charge in Contingency Fee Cases?
The percentage a lawyer charges in a contingency fee agreement can vary depending on the complexity of the case, the lawyer’s experience, and whether the case goes to trial. Typically, the percentage ranges from 25% to 40% of the total compensation.
Common contingency fee percentages:
- 25% to 30%: For cases that settle quickly without much dispute or the need for a trial.
- 33%: A common percentage for personal injury cases that settle out of court after some negotiation.
- 40%: Often charged in cases that go to trial, where the lawyer’s time and effort significantly increase.
Some agreements may include a sliding scale where the percentage increases if the case becomes more complex or goes to trial. For example, the lawyer might take 30% if the case settles early and 40% if it goes to trial.
Why it matters:
Understanding the typical fee percentages will help you assess how much you can expect to pay and how much compensation you will receive after the lawyer’s fees are deducted.
Key takeaway:
Contingency fees usually range from 25% to 40%, with higher percentages often charged for more complex cases or cases that go to trial.
4. What Happens to Case-Related Expenses?
In addition to attorney fees, there are often case-related expenses involved in personal injury cases. These expenses may include:
- Court filing fees
- Expert witness fees
- Medical record retrieval costs
- Deposition costs
- Travel expenses
Under most contingency fee agreements, the lawyer will cover these expenses upfront and then deduct them from your compensation once the case is settled or won at trial. It’s important to discuss with your lawyer whether these expenses will be deducted before or after the contingency fee is applied.
Example:
- Total settlement: $100,000
- Lawyer’s fee (33%): $33,000
- Case-related expenses: $5,000
- Remaining amount for the client: $62,000
Why it matters:
Case-related expenses can add up, so it’s important to understand how they will be handled in your contingency fee agreement. Make sure you know whether these costs are deducted from your compensation before or after the lawyer’s fee.
Key takeaway:
Lawyers typically cover case-related expenses upfront and deduct them from your compensation after the case is resolved.
5. Pros and Cons of a Contingency Fee Agreement
Pros:
- No upfront costs: You don’t have to pay anything to hire a lawyer at the beginning of the case.
- Incentive for the lawyer to win: Since the lawyer’s fee is contingent on winning, they have a strong incentive to work hard and maximize your compensation.
- Access to justice: Even if you don’t have the financial resources to pay a lawyer out of pocket, a contingency fee agreement allows you to pursue your case.
Cons:
- Higher fees for complex cases: If your case goes to trial or becomes complicated, the contingency fee percentage may increase, reducing your final compensation.
- Deduction of case expenses: Case-related expenses are deducted from your compensation, which can lower the final amount you receive.
- No recovery, no fee—but still costs: If the lawyer doesn’t win the case, you won’t owe attorney fees, but you may still be responsible for some case-related expenses.
Why it matters:
Understanding the pros and cons of a contingency fee agreement helps you decide whether this fee structure is the best option for your case.
Key takeaway:
While contingency fee agreements provide access to legal representation without upfront costs, it’s important to be aware of potential drawbacks, such as reduced compensation due to higher fees in complex cases.
6. When Is a Contingency Fee Agreement a Good Option?
A contingency fee agreement is a good option if:
- You cannot afford to pay a lawyer upfront
- You want the lawyer to have a strong incentive to win your case and maximize your compensation
- Your case has a strong likelihood of success, and you are confident that you will recover compensation
It’s also important to review the details of the agreement with your lawyer to ensure you fully understand the terms, including the percentage they will take, how expenses will be handled, and when fees will be deducted.
Why it matters:
A contingency fee agreement can make legal representation more accessible, but it’s essential to understand the terms before signing.
Key takeaway:
If you want legal representation without upfront costs and are confident in the strength of your case, a contingency fee agreement can be a good option.
Conclusion
A contingency fee agreement allows you to hire a personal injury lawyer without paying any money upfront. The lawyer’s fee is contingent on winning the case, and they are paid a percentage of the compensation you recover. This type of fee arrangement makes it easier for injured individuals to pursue justice, but it’s important to understand the percentage fees, case-related expenses, and the specific terms of the agreement before signing.
Disclaimer: The content of this article is for informational purposes only and does not constitute legal advice. The information provided is based on general research and is not intended to be a substitute for professional legal advice or consultation with a qualified attorney. Always consult with a lawyer regarding your specific legal situation.
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Additional Resources
- How Is Compensation Calculated in a Personal Injury Case?
- What Is the Difference Between a Settlement and a Trial?
- How Much Does It Cost to Hire a Personal Injury Lawyer?
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- What Should I Do After a Personal Injury Accident?