A “contingency fee” is, simply, a fee paid after certain conditions are met. When you hire an attorney on a contingency fee basis, you do not pay the attorney an hourly rate for his or her services. In fact, you pay nothing up front. At the end of the legal process, the attorney receives a percentage of the settlement or award if the case is successful.
In a contingency fee arrangement, the attorney usually advances any costs associated with the lawsuit, including fees for copying of documents, filing suit, court reporters, expert witnesses and investigators. If the case is successful, the attorney will be reimbursed for those costs and paid his or her percentage of the recovery.
Contingency fees are common in personal injury lawsuits and workers’ compensation claims. In both cases, the injured person is the plaintiff and hires an attorney on a contingency fee basis.
There are several advantages to the contingency fee system. Often, injured people often do not have the money available to pay for the costs of litigation or to hire an attorney on an hourly fee basis. Law firms are better equipped to take on these costs. The attorney also takes on the risk of the lawsuit, knowing that he or she will not be paid unless a recovery is obtained for the client. For this reason, the client can be sure that the lawyer is motivated to win the case, whether through a favorable settlement or a jury or arbitration award.