Business questionWhat is a contingency fee?

Here is the definition:

A method of paying a lawyer for legal representation by which, instead of an hourly or per job fee, the lawyer receives a percentage of the money her client obtains after settling or winning the case. Often contingency fee agreements award the successful lawyer between 20% and 50% of the amount recovered [read definition on wikipedia].

In plain english, your attorney works on a “contingent” basis, meaning the attorney’s payment is dependent on the outcome of the case. If you recover money, the attorney gets a percentage of the recovery. If nothing is recovered, you pay nothing in fees.

What’s Good About Contingency Fees?

For the client, contingency fees have many positives.

The cash-flow impact of litigation is substantially lower, you gain leverage over the other party who needs cash flow to fund the case, and a portion of the case’s risk is transferred and borne by your attorney.

The only “negative” of a contingency fee is that the fee can be substantial. When a recovery is made, the attorney fee is usually between 30-45% of the amount recovered. But, as we’re about to explain, this really isn’t as bad as it sounds.

100% of Nothing is Nothing

The contingency fee is not arbitrary. A dispute with $100,000 at stake that goes to trial would likely cost at least $30,000 – $40,000 in attorneys fees to litigate. When an attorney agrees to represent your company contingent on the outcome of the case, your attorney finances your case and the $30-40k + in fees, and risks losing.

While you recover less than 100% of your claim, it may be wroth engaging in a contingency fee if you can’t afford the on-going costs of representation.

Afterall, if you can’t afford to put up $30,000 – $40,000 to get to trial (plus case expenses and other costs), you’re not going to recover anything. And 100% of nothing, is nothing.

WLG Loves Contingency Fees

We love representating clients on a contingent fee basis for one very important reason: We can more zealously represent our clients.

When clients are billed for fees, it’s inevitable that bills will be challenged and cash crunches will arise. This effects how our firm can represent a client.

If $10,000 in discovery motions are needed, for example, but the client can’t afford it, the client’s claim is weakened.

Contingency fees result in more aggressive litigation…which results in higher settlements and more successful trials.

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