A contingent fee, also known as a contingency fee, is a method of compensation for legal services. A lawyer who works on contingency receives a percentage of their client’s monetary award as compensation rather than billing a fixed hourly rate. Contingency fees are particularly common in personal injury cases, where the successful lawyer is typically entitled to around 33% of the recovery amount.
Model Rules of Professional Conduct 1.5(c) requires a contingency fee agreement to be in writing and be signed by the client. Additionally, that writing must state the method by which the fee is determined and must clearly notify the client of any expenses for which the client will be liable. Because lawsuits include costs other than lawyer fees, a plaintiff may still be required to invest upfront money in their case even when their lawyer agrees to work on contingency.
Upon the conclusion of a case subject to a contingent fee, the lawyer is required to provide the client with a written statement stating the outcome of the matter. Additionally, Model Rule 1.5(d) prohibits contingency fee agreements for domestic relations matters—such as divorce cases—and for the representation of a defendant in a criminal case. Most states, including California and New York, have adopted such prohibitions on contingent fees.
Advocates of contingency fees argue that contingency fees:
- Improve access for indigent clients by enabling people who could not otherwise afford counsel to assert their claims;
- Provide extra incentives for attorneys to seek client success; and
- Enable clients to shift the risk of losing to the lawyer.
Critics of contingency fees contend that contingency fees:
- Encourage too many frivolous suits;
- Incentivize contingent fee lawyers to settle too soon and for too little; and that
- Contingent fees are usually too high relative to the risks that attorneys bear in a particular case.
[Last updated in July of 2022 by the Wex Definitions Team]
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