View random article

What Is a Contingent Fee?

There are instances when an attorney involved in a court case, either as the prosecution’s or defense’s legal counsel, is only paid if he or she wins the case or obtains a result that is in favor of his or her client. Such an instance refers to a contingent fee, also known as a conditional fee.

This kind of payment scheme is usually used when attorneys are involved in a lawsuit that may result in the awarding of damages, such as insurance suits. A contract is agreed to upon a litigant and his or her attorney, which details conditions set by both parties upon one another and the terms of the contingent fee. The fee is usually stipulated as a percentage of the damages won rather than an absolute value. The attorney earns a percentage of the damages as well as compensation for his or her billable hours along with other expenses incurred by the lawyer in the course of the trial.

A contingent fee is usually agreed to by litigants who cannot afford their own lawyers and by lawyers who are confident in winning the case. There is no format for the drafting of a contract that stipulates a contingent fee, but some bar associations may provide guidelines and regulations as to how and when a contingent fee can be done. These bar associations prevent excessive percentage, when an attorney asks for more than what is normally considered acceptable, which depends on the amount of damages expected to be rewarded.

Featured in Finance