Contingency fee agreements between lawyers and plaintiffs

Under contingency fee agreements (also called percentage fee agreements) the fee paid to the lawyer depends (i.e. is contingent on) the recovery obtained. Since only plaintiffs, and not defendants, expect to recover compensation at the end of the case, only plaintiffs can pay their lawyers on a contingency fee basis; defendants generally have to pay by their lawyers by the hour.

 

Contingency fee arrangements put a substantial risk of the plaintiff’s claim failing on the lawyer i.e. if there is no recovery there is no fee. For this reason, many lawyers are not willing to work on a contingency fee basis, but plaintiff personal injury lawyers frequently do.

 

Since the hourly rates of many lawyers are simply too high for “the man on the street” to pay, contingency fee agreements are common where the plaintiff has a valuable claim (often a personal injury claim) and cannot afford to pay a lawyer by the hour.

 

The following provides information on moral hazards associated with contingency fee agreements, the social utility of them, and incentives for lawyers working under contingency fee agreements.

 

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