Contingency Fees: When This Payment Structure Helps You, and When to Avoid It
If you hire a lawyer, then you must pay them. You might sometimes have a situation where a lawyer works pro bono, but it doesn’t happen often. When you hire a lawyer or law firm, you should discuss and settle on a payment plan that works for both of you.
In this article, we’ll talk about one particular kind of payment plan for legal help, the contingency payment structure. We’ll cover what to know about contingency fee structures, including when you should use one and when not to.
What a Contingency Payment Plan Means
First, let’s define contingency payments, so you know what this term means in legal circles. Paying on contingency means you only have to pay the attorney or firm you hired if they get a specific outcome for you. Usually, that means winning your case.
If you agree to a contingency payment plan with a lawyer or firm, and they don’t win your case or get some other particular outcome that the contract you sign stipulates, you pay them nothing. That will certainly make you feel better if your lawyer or law firm can’t get the outcome you hoped for in a legal battle.
Other Payment Options for Legal Help
You can also pay for legal help in other ways, though. You might pay your lawyer or law firm via a by-the-hour rate.
If so, it’s pretty self-explanatory. Your lawyer or firm will state the by-the-hour rate they charge. Every hour they work for you, you pay that amount.
As you can imagine, if you hire a lawyer or firm and they put in many hours on a legal case, the money you owe them might pile up very quickly. If you need criminal defense because you’re facing serious charges, you might hire a law firm that charges you a by-the-hour rate.
You might also have a lawyer on retainer. Usually, large corporations will have law firms or lawyers on retainer, especially if they often have legal work or need legal advice. Private citizens seldom have attorneys on retainer unless they’re in a position where individuals or entities sue them often.
You might occasionally have a situation where a law firm or attorney might agree to do a service for you for a flat rate. However, this doesn’t happen all that often. Usually, a law firm or lawyer would prefer to have you pay them by the hour for a job. They can usually get more money from you if they charge you by the hour versus having a set rate and spending as much time on the job as circumstances dictate.
When You Should Use a Contingency Payment Plan
As for contingency payment plans, you will usually have just one situation where you’ll hire a lawyer or law firm, and they will agree to charge you this way. If you bring a personal injury lawsuit against a person or entity who you allege harmed you or made you ill, that’s when a contingency payment plan makes sense.
You might bring a personal injury lawsuit against a doctor who prescribed you the wrong medication and made you very ill. That’s medical malpractice, and these cases work their way through the court system quite often.
You might bring a personal injury lawsuit against a company that manufactured a product that harmed you or made you sick. The legal system calls that a product liability lawsuit.
You may also sue a drunk driver who plowed into your car and injured you. Maybe they even killed a family member who was in the car with you. In that case, you’re bringing a wrongful death suit against the driver who caused the wreck.
In any of these situations, if you consult with a lawyer, they will likely agree to a contingency payment plan. They know they will only collect money if they can win your case for you or at least get you a settlement offer.
They usually expect 30-50% of your winnings or settlement. That might seem like a lot, but remember that if your attorney does not get you the desired outcome, you don’t pay them anything.
You might regard that as a win-win scenario. It might make you unhappy if your lawyer loses the case, but at least you pay them nothing. You lose the time you put into the lawsuit, but that’s it.
When to Avoid This Type of Payment Structure
You will also have plenty of scenarios where a contingency payment plan won’t make much sense for either you or the law firm or lawyer you hire. In such cases, maybe you would hope you can set up a contingency payment plan, but it’s doubtful you can find a lawyer to agree to it.
For instance, consider a case like the one we discussed earlier, where the police say you committed a crime. Even if you didn’t do it, you must defend yourself in court. You want an excellent criminal defense lawyer in such an instance.
It would be great if you could find a lawyer who would agree to only accept payment if they get you off the hook for the crime of which the police accused you. However, just about any lawyer or firm you find won’t let you pay them that way.
They will likely demand a by-the-hour rate. If you want to walk away with your freedom, you must probably pay what they demand unless you can find a lawyer or firm who will do the job for less money.
Contingency payment plans usually only come into play in personal injury cases, and when you hear the term, maybe it’s during a late-night commercial for personal injury law firms. Such firms usually make good money since these cases happen all the time. If you can set up a contingency payment plan with your lawyer when bringing a personal injury case against a person or entity, you should do it.