Contingency Fee Agreements

What Are the Required Elements of a Contingency Agreement?

Direct Answer: A contingency fee agreement is the written contract between client and attorney specifying the percentage fee, how costs are deducted, the client's liability if the case is lost, and termination rights. Under ABA Model Rule 1.5(c) it must be signed by the client before representation begins.

ABA Model Rule 1.5(c) requires that a contingency fee agreement be in a writing signed by the client. The agreement must state:

• The method by which the fee is to be determined, including the percentage(s)
• The litigation and other expenses to be deducted from the recovery
• Whether such expenses are deducted before or after the contingency fee is calculated
• The scope of representation covered by the agreement

Gross vs Net Calculation

This is the single most important financial distinction in your retainer agreement. The difference can amount to thousands of dollars:

Always ask your attorney whether the fee is calculated on the gross (total settlement) or net (settlement minus costs). If the agreement is ambiguous on this point, ask for clarification in writing before signing.

Sliding Scale Structures

Many attorneys use a tiered fee structure that increases as the case progresses through more resource-intensive stages:

• 25% — if settled during the pre-litigation demand phase
• 33⅓% — if settled after a lawsuit is filed but before trial
• 40% — if the case goes to trial
• 45% — if an appeal is necessary

Cost Responsibility

The agreement should clearly address two scenarios:

Red Flags to Watch For

• No written agreement — this violates Model Rule 1.5(c) in most states
• Ambiguous gross/net language — insist on explicit clarification
• Fee percentage above 40% without clear justification
• No mention of cost responsibility on a loss
• No termination clause or penalty for switching attorneys
• Vague scope of representation (e.g., does the agreement cover appeals?)