What Should I Know About the Contingency Fee Agreement?
This article is dedicated to exploring and explaining the language and terminology contained in our contingency fee agreement (also known as a retainer agreement), which can be located and reviewed here. Please be mindful that the attached contingency fee agreement and the language contained herein are used for illustrative and explanatory purposes only. Review the wording and language of your particular agreement as the terms and conditions may vary at different law firms.
What Should I Know About the Contingency Fee Agreement?
A contingency fee agreement is the document that defines and governs the attorney-client relationship and sets out the rights and responsibilities of the attorney and client during and after representation. If you are considering entering into a contingency fee agreement, please be sure that you understand the document in its entirety before signing. Additionally, if you discover during the course of representation that you have a question about the nature or terms of your agreement with your lawyer, be sure to request a detailed explanation.
Do not sign or enter into any contingency agreement, regardless of how much you like the lawyer or how much pressure you are under, unless you understand the entire document. If you do not understand certain aspects of the document, you should not sign the agreement. A sample contingency fee agreement has been included with this article and should be used as a reference throughout.
You have the right to request that any aspect of the agreement be explained at length, even in writing, at any time, if you so chose. If you feel that your lawyer is treating you unfairly or improperly, please consider contacting the North Carolina State Bar.
Scope of the Attorney-Client Relationship
The first paragraph of the retainer agreement is used to identify the parties or persons entering into the contingency agreement. Additionally, the first paragraph often contains language defining the scope of representation between the parties.
“I, (Client’s Name), do hereby employ and retain (Law Firm’s name), to represent me in the following matters: all past, present and future damages resulting from my (Date of Accident) motor vehicle accident.”
This is a scope of representation clause, which identifies who you are, who you have hired to represent you and the legal matter with which the attorney will be assisting you. The portion of the statement that says you are hiring the lawyer for “all past, present and future damages” confines the duties of the lawyer to the motor vehicle accident. As such, the client will be engaging the services of the lawyer for the purposes of this one accident – not to represent the client in subsequent cases or serve as the attorney in any other legal matter the client may have. It is important to ensure that the client and the lawyer clearly agree and understand what exactly will be included in the scope of representation. Should the client require assistance with property damage or diminished value claims, the scope of representation clause should be amended to reflect the same.
Section 1: Calculation of the Fee
Below the initial language, Section 1 of the sample agreement specifies how the contingent fee is calculated upon receiving a settlement for your case.
However, you will notice that a considerable portion of the language in this first section is dedicated to explaining how the law firm determined the reasonableness of the fee. This language essentially codifies the lawyer’s ethical responsibility to ensure that the contingency fee is reasonable and that it accurately represents the amount of work performed on your case.
In this sample agreement, the contingency fee is 33⅓ percent of the gross settlement. This means that if the attorney secures a $30,000 settlement for a bodily injury claim, the attorney’s total fee under the contingency agreement would be $10,000, or 1/3 of the $30,000 settlement. You should be aware of the possibility that the contingency percentage may differ on your agreement. Calculate your attorney’s fees using our calculator tool.
Lastly, the final three sentences of Section 1 are very important because they state that the contingency fee increases in the event that a lawsuit must be filed. In this sample agreement, if a settlement cannot be achieved without filing a lawsuit, the contingency fee will be 40 percent of the gross settlement. Therefore, if after filing a lawsuit, a jury awarded a verdict of $36,000 for a client damages, the attorney’s fee would be 40 percent of the gross recovery, or $9,000. The rationale for the increased fee is that a lawsuit requires significantly more time and effort on the part of the attorney than an out-of-court settlement does.
Section 2: Expenses and the Final Bill
The second section of the contingency fee agreement ensures that the client understands that he or she is responsible for paying the final bill for services rendered by the attorney but, more importantly, it is to inform the client that there may be additional expenses owed at the conclusion of the case if the law firm pays legal expenses on the client’s behalf. You may see some differences in this section on your contingency agreement, depending on the law firm.
Some law firms spell out the various types of expenses that might be incurred by the law firm as they represent you, such as costs associated with requesting medical records and bills, hiring experts, mail and postage costs, etc., while others prefer to keep this provision more generalized. Also, some law firms charge a small one-time fee for administrative costs, so you may want to inquire further before signing the agreement.
Section 3: Medical Payments Coverage
The third section of the contingency fee agreement as seen in the attached sample governs and provides for a small one-time administrative fee to the law firm in exchange for securing medical payments (“MedPay”), personal injury protection (“PIP”) or other no-fault coverage as set forth by an opinion of the North Carolina State Bar.
In the attached contingency fee agreement, the flat administrative fee for the collection and handling of the medical payments coverage is $250. This charge is for “locating, requesting and obtaining MedPay and is earned when received.”
Essentially, the purpose of the fee is to compensate the law firm for time and money spent tracking down these benefits and securing them. The insurance company often requires copies of medical records and bills, as well as other information pertaining to the accident, before releasing the benefits. It can take some time to gather these documents and comply with the requests of the insurance company.
Medical payments coverage may not be available in every case. For more information about the availability of medical payments coverage, visit our Medical Payments Coverage section.
Sections 4 and 5: Cooperation
The fourth and fifth sections of the attached contingency fee agreement are included to ensure a good working relationship between the attorney and client over the course of the case.
The section titled “cooperation” is an important paragraph to the overall agreement. The continued success of any professional relationship is governed by how the parties should cooperate during and after the case. The agreement states that the client will assist the law firm “in every reasonable way, including, but not limited to, the location of witnesses, documents and evidence.” This ensures that the law firm and the client’s interests are aligned.
Additionally, the section titled “contact” asserts that communication between the parties is key to the success of the relationship. Moreover, the agreement states that the “law firm may terminate their services if [the client does] not maintain contact at least once every four (4) months.”
Section 6: Withdrawal for Non-Payment of Expenses & Lack of Cooperation
The sixth section expands upon the fourth and fifth sections by adding non-payment of expenses and lack of cooperation as additional reasons why the law firm may choose to withdraw from the representation of a particular client.
Should a lawyer decided to withdraw from representation, the contingency fee agreement requires the law firm to mail written notice to the client’s last known address.
Section 7: Representation
The seventh section of the sample contingency fee agreement is to inform the client that the law firm will decide which attorneys will be assigned to the client’s case and how much to pay the attorneys.
However, it also gives the law firm the right to assign the client’s case to an “attorney outside of the law firm” at their own discretion. This means the law firm reserves the right to refer the client’s case to another attorney, if necessary.
Section 8: No Promises
This section expands upon an attorney’s ethical duty to refrain from making promises to any client regarding the outcome of a particular case. No two cases are completely alike, regardless of how many similarities they may share with one another at the onset, and anything can happen as a case progresses.
As such, if you are signing a contingency fee agreement with an attorney who makes promises that you will be paid compensation by the end of your case, that attorney is promoting unfair expectations and you should be wary of any agreement that allows this attorney to represent your legal interests.
Section 9 and 10: Granting Authority to the Law Firm
These two sections allow the law firm to make case management decisions and comply with legal formalities on the client’s behalf in order to speed the case along more efficiently. If, for example, the lawyer had to request the client’s permission to make a notice of appearance with a court after the lawsuit was filed, that is an additional step that would have to be taken in a process that already requires the lawyer to comply with several formulaic protocols.
Section 10 allows the attorney to pay legal expenses out of the law firm’s funds in order to expedite records requests, hire experts, and pay court costs and other fees that would otherwise require the attorney to get permission from the client on each separate occurrence. If you would prefer that the law firm contact you before making large payments toward legal expenses, or if you would like to pay legal expenses yourself, you should express this to the law firm before signing a contingency agreement that contains this provision.
Section 12: Attorney-Client Dispute Resolution
This section deals with a situation in which there is a dispute between the attorney and client after the representation has already begun or upon the conclusion of the case. Essentially, the attached contingency fee agreement states that the parties agree to participate in non-binding mediation or arbitration as a means of resolving any disputes.
Mediation and/or arbitration provide a less confrontational way of dealing with disputes. The agreement requires the client to forego filing suit or adjudicating matters related to the representation before complying with one of these alternative dispute resolution methods.
For more information on mediation and arbitration, you can visit the alternative dispute resolution articles found on our website,
Section 13: Pre-suit Termination
This section expands upon the earlier sections involving withdrawal from the client’s case, but deals specifically with pre-litigation matters, i.e., before a lawsuit has been filed. An attorney may terminate the attorney-client relationship for any reason prior to a lawsuit being filed if the termination would not otherwise materially affect the client’s case in a negative manner.
Section 14: Disposal of Client’s File After Representation Has Ended
The final section of the agreement allows the attorney to destroy the client’s file one year after the attorney-client relationship has ended. This provision concerns data and document retention and management. It would be quite difficult for an attorney to maintain every client’s file after the end of the relationship, even when stored electronically, so this provision allows the attorney to dispose of files that are no longer being actively worked on. Of course, prior to the one-year deadline, you have the right to request a copy of your file. See NC State Bar opinions for more information on disposal of closed files.