Contingency Agreements

We don’t get paid unless you get paid! How many times have you seen this slogan on a bus or bench advertisement and wondered what it means? In practice, this mainly applies to personal injury cases and there are some very good reasons why such an arrangement benefits both the injured person the law firm involved. Litigation is a very expensive process. Lawyers who handle personal injury cases have often completed many years of schooling, followed by long apprenticeships under senior counsel prior to handling such matters. By that point their hourly rate is in the hundreds of dollars and fees rise very quickly. Most persons who have sustained a personal injury do not have the up-front retainer to hire a lawyer immediately after being involved in an accident, which is unfortunately when they need it the most. The contingency agreement came about as a solution to this problem.

What is a contingency agreement?

A contingency agreement is a contract with your lawyer which stipulates that you will only pay their legal fees if they win your case at trial or in a negotiated settlement. If they are unsuccessful, you do not pay any legal fees at all. Depending on the terms of the contract, however, you may still be responsible for paying all or a portion of disbursements or out-of-pocket expenses. A disbursement refers to a third-party cost that the lawyer pays on your behalf to any third party, i.e. court filings, physio therapists, medical examiners, etc. It is important to ask your lawyer whether they will pay for disbursements in case of a loss, to avoid any unpleasant surprises later.

How does a contingency free agreement work?

In a contingency fee agreement, the fee is not a set number. It is rather a percentage of the total that is recovered on your behalf by the lawyer, regardless of the sum. This usually includes any potential costs that are awarded against the other party. For clarity, legal costs are awarded by the courts against the party who lost their case. They are almost never the full amount of the actual legal fees claimed, but depending on the severity of the loss, could rise to 60% to 90% of that total. To calculate the contingency in any given case, you would take the total awarded, add the costs, subtract the disbursements, apply the contingency fee percentage and HST. The law firm will keep their contingency fee and applicable HST and pay the rest to you.

A simple example of a contingency fee calculation

Let us say that you went out for a walk and tripped over a cracked sidewalk in Etobicoke and severally injured your knee. You retain a lawyer on a 30% contingency agreement who fights against the City of Toronto and at trial wins you a $200,000.00 settlement. You are awarded $60,000.00 in legal costs and the total disbursements were $30,000.00.

In this case the calculation would be as follows:

$200,000.00 award + $60,000.00 costs $260,000.00
Less: disbursements -$30,000.00
Subtotal: $230,000.00
Less: 30% contingency fee on subtotal -$69,000.00
Less: HST on contingency fee -$8,970.00
You Receive: $152,030.00

How is a contingency fee determined?

The precedent on a contingency fee usually ranges from 10% to 45% and is determined by a variety of factors. A skilled and experienced lawyer will be able to determine the merits of a case fairly quickly and will determine their amounts based on things such as the likelihood of success, the complexity of the case, the time required to advance the case, the expense and disbursements involved, the rough amount of the expected recovery and the rough amount of the expected costs, among others. Lawyers who ask for a high contingency fee risk losing the file to other counsel. Those who ask for too low a fee may find themselves putting incredible hours and costs into a high-risk, low-reward case. While there is no hard and fast rule on this, most personal injury law firms retainers are in the range of 30% to 35%.

Other types of contingency arrangements

While less common and usually reserved for unique cases, sometimes lawyers may offer a “graduated contingency fee”, where the cases is settled before certain legal steps are taken. For example, a contingency fee may be 25% if the matter settles before an Examination for Discovery, 30% if it settles before a Pre-Trial and 35% if it is only resolved after trial. Alternately, some lawyers offer a partial contingency fee on riskier cases. In such an arrangement, you pay an upfront fee to your lawyer to begin the work and then an additional, usually lower, contingency fee if they win your case.

Knowing your rights

Whatever the arrangement is, it is important to understand the structure of the contract before signing it. Ensure that your lawyer carefully and thoroughly explains the full retainer agreement to you. If you or a loved one have been in an accident and believe you may have a personal injury claim, call Empel Law Professional Corporation at 416-500-1937 to consult with a Polish speaking lawyer.

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Arkadiusz J. Empel urodził się w Katowicah. Jako dziecko emigrował do Kanady, razem z rodziną, lecz wrócił jako student aby ukończyć Pracę Magisterską w Krakowie. Przez swoją pracę z polonią w okolicy Toronto utrzymał władność w swojim języku ojczystym. Jeżeli Państwo życzy się skonsultować prosto z adwokatem Polski, proszę przedzwonić na numer 416-500-1937.