Contingency Fee Agreements: What to Check Before You Sign

Key takeaways

In a contingency fee arrangement, the lawyer's fee is a percentage of what's recovered. If nothing is recovered, you typically owe no fee, though expenses may still matter.
The ABA's model rule says a contingent fee agreement must be in writing, signed by the client, and explain how the fee is calculated.
It should say the percentage at settlement, trial and appeal, and whether expenses come out before or after the fee.
Ask what happens to expenses if you lose, and how liens will be handled.
States adopt their own versions of the rule and may limit percentages.

Money worries stop many people from talking to a lawyer at all. Contingency fees exist partly to solve that: instead of paying by the hour, you agree that the lawyer is paid a share of the money recovered.

That sounds simple, but the agreement you sign decides who pays for what. A few lines in the fine print can change what you actually take home. Here's what an agreement is supposed to contain and what to double-check. Educational only, not legal advice.

The basic idea

With a contingency fee, the lawyer's payment depends on the outcome. If there's a recovery, the lawyer receives an agreed percentage. If there isn't, you usually don't owe an attorney fee. Case expenses, such as filing fees, records and expert costs, are a separate topic, and they're treated differently from one agreement to another.

What the rules require

The American Bar Association's Model Rules of Professional Conduct, which many states have adopted in some form, set out clear expectations for contingent fees:

the agreement must be in writing and signed by the client;
it must state how the fee is determined, including the percentage if the case settles, goes to trial or is appealed;
it must list the litigation and other expenses that will be deducted from the recovery;
it must say whether those expenses are deducted before or after the fee is calculated;
it must clearly tell you which expenses you may be liable for whether or not you win.

Fees and expenses must also be reasonable. Your state's own rule may add requirements or cap the percentage in certain cases, so check the version that applies where the lawyer is licensed.

Why "before or after expenses" matters

Here's a simple example. Say a case settles for $100,000, the fee is one third and expenses are $6,000.

Fee on the gross amount: fee is about $33,333. After $6,000 in expenses, about $60,667 remains before any liens.
Fee after expenses: expenses come off first, leaving $94,000, and the fee is one third of that, about $31,333. About $62,667 remains before any liens.

The difference is about $2,000 here, and it grows with larger expenses. Plug in your own numbers with our Attorney Fee Explainer.

Questions to ask before you sign

What percentage applies if the case settles before a lawsuit is filed? What if a lawsuit is filed, or if it goes to trial or appeal?
Is the fee calculated before or after expenses?
Which expenses will be charged, and who pays them if we don't recover anything?
How will medical liens and reimbursement claims be handled, and who negotiates them?
Will I get a written breakdown of fees, expenses and liens before I approve a settlement?
What happens if I decide to change lawyers?
Who will actually work on my case?

Take your time You can ask for the agreement ahead of time, read it carefully and compare more than one lawyer. Pressure to sign immediately is a warning sign.

Frequently asked questions

Do I pay anything upfront in a contingency arrangement?

Often not, but agreements differ. Ask exactly what you may owe and when.

What if I lose my case?

You typically owe no attorney fee, but the agreement should say whether you owe case expenses.

Is one third the standard fee?

It's common, but there's no universal rate. The percentage is negotiated and can change by stage of the case.

Does the agreement have to be written?

Under the ABA model rule, a contingent fee agreement must be in writing and signed by the client. Check your state's version.

Sources and references

Model Rule 1.5: Fees, American Bar Association (americanbar.org)
Compensatory damages, Legal Information Institute, Cornell Law School (law.cornell.edu)
Your state's official sources: the state legislature's online statutes, your state court system's self-help pages, and your state insurance department. Your state bar association's website publishes your state's version of the fee rule.

This article is educational and is not legal advice. We are not a law firm and do not refer or recommend lawyers. Laws differ by state and change over time. Read our Legal Disclaimer and Editorial Policy.