What are alternative fee arrangements?

Alternative fee arrangements (AFAs) are any billing method other than the traditional hourly rate. They include contingency fees, hybrid contingency/hourly arrangements, flat fees, capped fees, success fees/bonuses, retainer agreements, and reverse contingency fees. AFAs aim to align attorney and client interests on cost predictability and outcomes.

What is a hybrid contingency fee?

A hybrid contingency fee combines a reduced hourly rate with a smaller contingency percentage. For example, the attorney might charge $150/hour (instead of their normal $400/hour) plus a 15% contingency on the recovery. This reduces the client's downside risk while giving the attorney more financial stability during litigation.

What is a flat fee arrangement?

A flat fee is a fixed amount charged for a defined scope of legal work, regardless of how many hours the attorney spends. Flat fees are common for discrete tasks like contract drafting, uncontested divorces, or simple wills. They provide complete cost predictability for the client.

What is a reverse contingency fee?

A reverse contingency fee compensates the attorney based on the money saved rather than the money won. It is used in defence-side litigation where the attorney's fee is a percentage of the difference between the amount claimed and the amount actually paid. For example, if a plaintiff demands $1 million and the case settles for $300,000, the attorney's fee is calculated on the $700,000 saved.

When should I consider an alternative fee arrangement over a pure contingency fee?

Consider an AFA when: the case has uncertain damages but strong liability (hybrid may be appropriate), you want cost certainty (flat fee), you are the defendant (reverse contingency), or your case type doesn't qualify for a standard contingency fee (business disputes, some employment cases).

Alternative Fee Arrangements

Not every case fits a pure contingency fee model. Alternative fee arrangements — including hybrid contingency, flat fees, capped fees, and reverse contingency — offer different risk-sharing structures for cases where standard contingency may not be appropriate or available.

Comparison of Fee Structures

Structure	Client Risk	Best For
Pure Contingency	None (fees) / Low (costs)	PI, med-mal, employment, mass tort
Hybrid Contingency	Medium (reduced hourly)	Business disputes, uncertain damages
Flat Fee	Fixed / Predictable	Discrete tasks, transactional work
Capped Fee	Bounded hourly	Litigation with predictable scope
Reverse Contingency	Performance-based	Defence-side litigation
Hourly Rate	Highest / Unlimited	Complex commercial, regulatory, M&A

Hybrid Contingency

A hybrid arrangement combines elements of hourly billing and contingency. The attorney charges a reduced hourly rate (often 40–60% of their standard rate) plus a smaller contingency percentage (typically 10–20%) of the recovery.

Example: An attorney with a $400/hour standard rate might charge $175/hour plus 15% of the recovery. On a case requiring 200 hours that settles for $500,000, the total fee would be $35,000 (hourly) + $75,000 (contingency) = $110,000 — compared to $166,667 under a pure 33⅓% contingency or $80,000 under a pure hourly arrangement.

Flat Fee

A flat fee provides complete cost certainty. The attorney and client agree on a fixed amount for a defined scope of work, regardless of how many hours are required. Flat fees are most common for predictable, discrete legal tasks: drafting contracts, forming business entities, handling uncontested divorces, preparing wills and trusts, or filing trademark applications.

Capped Fee

A capped fee arrangement uses standard hourly billing but with a predetermined maximum. If the attorney's hours exceed the cap, they absorb the additional work at no extra charge. This gives the client the benefit of hourly billing transparency with a ceiling on total cost. Caps are commonly used in litigation where the scope is reasonably predictable.

Reverse Contingency

A reverse contingency fee is used in defence-side litigation. The attorney's fee is a percentage of the money saved — the difference between the amount initially demanded (or the exposure assessed) and the actual resolution amount. This aligns the defence attorney's incentive with the client's goal of minimising liability.

Success Fee / Bonus

A success fee or bonus arrangement involves a base fee (hourly or flat) plus a bonus payment triggered by achieving a specific outcome — for example, a favourable verdict, a settlement above a threshold, or completion within a deadline. This structure is common in complex commercial litigation and regulatory matters.

Alternative Fee Arrangements

Comparison of Fee Structures

Hybrid Contingency

Flat Fee

Capped Fee

Reverse Contingency

Success Fee / Bonus

Frequently Asked Questions

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