Contingency Fee Contracts

A contingency fee is a type of legal fee arrangement where the attorney's compensation is dependent on the outcome of the case. Specifically, the attorney is paid a percentage of the recovery obtained on behalf of the client, whether through settlement or judgment. If there is no recovery, the attorney typically receives no fee.  An agreement must be in writing and signed by both the attorney and the client. The agreement must clearly state the method by which the fee is determined, including any variations in percentage based on whether the case is settled, goes to trial, or is appealed. Additionally, the agreement must specify how litigation and other expenses will be handled—whether they are deducted before or after the contingency fee is calculated.

The primary purpose of a contingency fee is to enable a person to obtain representation when they lack the financial resources to pay a retainer upfront. The attorney assumes the risk of receiving no compensation if the case is unsuccessful, which incentivizes diligent work to achieve the best possible outcome for the client. This risk-sharing feature also discourages frivolous litigation, as attorneys are unlikely to take on cases with little or no merit under such an arrangement.  The costs associated with a personal injury suit, and which an attorney will advance in a contingency fee arrangement include, but are not limited to advance medical deposits or full payments, medical bill and record copies, investigations into the parties, accident scene, and vehicles, court and deposition costs, expert witnesses, and a myriad of other up-front costs. Signing a contingency fee contract allows the attorney to take on this responsibility.

Personal injury lawyers in Texas typically take personal injury cases on a contingency basis, and the percentage increases based on three stages of your claim: (i) settling your claim before a lawsuit is filed, (ii) settling your case after a lawsuit is filed but before going to trial, or (iii) obtaining a judgment in a court.  In Texas, attorneys are held to the highest standards of ethical conduct when dealing with clients.  This requires honesty, as well as loyalty to the client.  Thus, a contingency fee agreement cannot penalize a client for changing counsel, grant an attorney or firm an impermissible proprietary interest in a client’s claims, or other unconscionable acts.  However, it is common for an attorney to maintain a lien on a case if representation is terminated before a case is settled, so that the hours and expenses spent on a case before termination are at least partially compensated.

Under the Texas Rules of Professional Conduct, an attorney cannot enter into an arrangement for, charge, or collect an illegal fee or unconscionable fee.  An unconscionable fee is one that is unreasonable if a competent lawyer could not form a reason able belief that the fee is reasonable.  

The bottom line: taking a case on a contingency basis is a large risk to the attorney, and is a relationship that both parties should take seriously.  Before you sign a contingency fee contract, you should understand your obligations to the attorney and your claim, as well as your attorney’s obligations to you.