It is common knowledge that most law firms are paid on a contingency basis. What does this mean?
It means the firm receives payment out of any settlement you receive, not just for their work on your case.
This can be an important consideration when deciding which law firm to hire. Why should I choose a law firm that will take half or more of my potential recovery?
The answer depends on whether you want to pay for expertise in handling your lawsuit or need representation in court while retaining all of your settlement money.
Make sure you have a resource for this.
Contingent Payments are an Important Part of the Legal Process
When you file a lawsuit, the court will order each party to pay their costs.
This includes filing fees, service of process fees, witness fees, and other ancillary expenses related to trial preparation.
If either side prevails in the litigation, that side can ask the court to make the losing party pay those costs. The winning party is also typically awarded attorney’s fees for bringing the lawsuit.
These two types of payments – reimbursement of costs and payment of attorney’s fees – are known as “costs” or “disbursements.” They are not damages recoverable as part of your case.
However, the third type of payment may be available if you win your case: contingent fees. Contingent fees are a percentage of the amount awarded in your case.
They, therefore, may be recoverable by you if you prevail in trial or arbitration against an opponent who has insurance coverage for certain types of losses.
Types of Contingent Fees
There are two basic kinds: “lump sum” contingent fees, under which the law firm will take 30% to 40% percent (or more) as its fee when it obtains a settlement; and “percentage” contingent fees, where the law firm takes 33%, but only after damages have been paid out to compensate injured parties.
The former arrangement is most common with personal injury cases such as automobile and construction site accidents.
In contrast, the latter arrangement is usually used for business litigation involving contract disputes and other business-to-business conflicts.
Pros and Cons for Both Parties Involved
Plaintiff and Defendant Contingent fees are a way of “sharing” the risk in bringing your case to trial or arbitration: if you lose, then no fee is paid.
If you win (and even after some deduction for costs), then the law firm’s attorney’s fees will be fully reimbursed by this settlement payment from the defendant.
There are pros and cons with each type of contingency agreement depending on your goals as a plaintiff or defendant.
When You Should Ask Your Lawyer About Contingency Fees
If it would benefit you financially to do so, ask about contingent fees early on when consulting an attorney.
The attorney will let you know if they are willing to work on a contingency basis.
This can help cut costs for both sides, especially when an opposing party has insurance that covers certain kinds of losses.
How to Find Out If Your Lawyer Will Be Willing To Take On Your Case
If your lawyer isn’t willing to accept the contingent fee arrangement, it may be worth looking elsewhere.
You should not have to pay out-of-pocket for expenses related to trial preparation and other legal fees, otherwise known as “costs.” Still, you also do not want your attorney taking more than his fair share in case of settlement either!
The contingency fee agreement between plaintiff and defendant is important because it spells out each party’s financial obligations if the case is lost or won.
It is important to understand how contingent payments work before entering into any lawsuit!
The contingent fee agreement is an important part of the legal process. Who can use it in lawsuits, but it also applies to other cases like personal injury or bankruptcy.
You should always ask your lawyer if they would be willing to take on your case with a contingency fee before signing any documents that might commit you to pay them for their services upfront instead.
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