What is a contingency fee agreement?

A contingency fee agreement is an agreement whereby the attorney does not charge you an hourly fee for his or her services, but rather takes a percentage of the recovery as his or her attorney fees at the end of your case. Here is an example that differentiates between an hourly agreement and a contingency agreement:

Hourly Agreement:

Attorney charges $100 per hour for his services. He performs 50 hours in completion of his work for client. The total attorney fees are his hourly rate ($100/hour) multiplied by the number of hours he worked (50), for a total attorney fee of $5,000.

Contingency Agreement:

Attorney enters into a contingency agreement with client, whereby attorney will earn fees based upon one-third of the gross amount recovered on behalf of client. Attorney performs 100 hours of work and recovers $15,000 on behalf of client. The total attorney fees are one-third of the gross recovery, or $5,000. This is regardless of the total number of hours the attorney worked on the case.

Under a contingency fee agreement, if no recovery is made for the client, then the attorney does not earn any fee, regardless of the number of hours he or she may have worked to try and obtain a recovery for you. The same is not true under an hourly agreement, where the attorney is entitled to be paid for the number of hours he or she worked, regardless of the outcome of the case.

A contingency fee agreement should not be confused with client expenses. In most cases, even if the attorney pre-pays the expenses for the client, the client is responsible for repaying the expenses, even if no recovery is made in the case. This is because most contingency fee agreements only apply to fees, not to the expenses incurred in handling the matter.

The information contained in this blog post is general information, and should not be treated as legal advice. No attorney/client relationship exists between the reader and Lafferty, Gallagher &Scott, LLC without a signed Attorney Contract Agreement of Representation. Each case is unique and past results should not be treated as a guarantee of the results in your case.