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What Is a Contingency Fee?

By Laura Strachan, Esq. | Last updated on

Contingency what? In addition to nearly impossible legal jargon, procedural issues, and procedural hoops, the various payment structures for an attorney is one more aspect that serves to confuse a layperson in trying to successfully maneuver through a legal issue. A contingency fee is the most common fee structure used in personal injury actions, but not necessarily the easiest to understand.

Flat fees, referral fees, consultation fees, statutory fees. The type of fee agreement you enter into with your attorney can have an impact on your recovery. So here is a little contingency fee breakdown. When compensating your attorney based on a contingency fee, their paycheck is contingent on you winning your case. Victory or defeat, the attorney typically will collect some expenses, but the contingency fee will be based on a previously agreed percentage of the recovery.

Contingency Fee Details

One-third is a common percentage, although some courts will place a cap on the amount of money an attorney can recover under this payment structure. The nature of a personal injury lawsuit lends itself nicely to this type of compensation in that clients who would not normally be able to afford a lawyer are able to get representation (and hopefully recover). It also works out nicely for attorneys who may see their fees soar for certain personal injury cases with big payouts.

Of course, there are some types of cases where this type of agreement is inappropriate. Divorce is one type of legal proceeding where courts are not necessarily trying to promote the dissolution of a marriage by allowing the lawyer to get a big payout for a large settlement. A contingency fee arrangement is also not available for most matters concerning general legal advice, or when an individual is getting sued.

No two fee agreements are exactly alike. And the sea of numbers and legalese is no excuse for not taking the time to understand the terms of the contingency fee agreement. One important clause to look at is when the lawyer is collecting his fee -- deducting trial costs and expenses before or after collecting a fee can have an impact on the amount that you recover. The best approach is to ask. If you do not understand a term or the nature of the fee, ask the lawyer to explain it to you.

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