Contingency Fees: Read the Fine Print

The average attorney fee varies between $100 to $300 per hour. The costs of your legal fees can quickly escalate beyond what you estimated. Is it better to hire a contingency lawyer?

No Win No Pay

Many law firms market themselves stating that unless the client wins, they don't get paid. When you find yourself in a legal situation with limited funds, this might seem like the perfect solution. There are, however, several aspects to consider before you sign on the dotted line.

What Are Contingency Fees?

When you make a contingency fee agreement with your attorney, you don't pay any lawyer's fees upfront. The attorney will take your case with the intention of winning a percentage of the compensation paid to you from a settlement with the other party.

What Percentage Does the Attorney Take?

The average contingency fees are around one third or 33% of the settlement amount. Some attorneys can charge up to 40%. Some attorneys also use a sliding scale as the case progresses.

An example of this would be when the case settles before trial; the attorney will charge 33%. When it goes to court, and a jury hears the case, the percentage can go up to 40%. Discuss all your concerns regarding percentages with your attorney and make sure it's in writing before you sign the contract.

Types of Cases That Work With Contingency Fees

Legal cases that use contingency fees are usually situations where an injury occurred, and the person sues an individual or company for money. The personal injury could be from a car, boat, or work accident, or defective products. It's also used when creditors are harassing debtors in violation of the Fair Debt Collection Practices Act. Less often, contingency fee cases will involve employment issues and extensive debt collection.

Adoption, immigration, criminal defence, bankruptcy, divorce, drafting legal documents and registration of a business, trademark, patent or copyright are legal matters that cannot use contingency fees.

Be Aware of the Costs

Don't let the fine print of "costs" catch you unaware. The costs of your case will be the expenses that occur to keep your case active. These costs can be filing, preparation of documents, and paying expert witnesses. They are separate from the hourly fee your attorney charges typically.

You have to be very sure how these costs will be calculated and compensated, whether you win or lose the case. Clarify in your contract whether it will be part of the percentage contingency fee or an extra fee on top of that percentage. If you lose the case, make sure you're still liable to pay the costs out of your pocket.

A Frustrating Situation

It's challenging to decide on the fairness of a contingency fee. It's a reality that either the client or the attorney will feel that they got the wrong end of the deal.

When a case settles quickly, or large sums of money are paid, the client will feel that it's unfair compensation for the amount of work that the attorney put in. On the other hand, if the case drags on or a small amount of money is paid out, the attorney will feel under-compensated for hours worked.

The Verdict on Contingency Fees

Not everyone has the resources available to seek justice through the legal system without making a contingency fee deal with an attorney. Attorneys won't take on the risk of your case if they cannot get the best deal for themselves. Make sure you read the fine print and consider all the possible outcomes before signing the contract.