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What to look for in a contingency fee agreement

Sep 29, 2016

Otto Dix - Portrait of the Lawyer Hugo SimonsYou may have heard advertisements for lawyers on AM radio which proudly proclaim that at such-and-such a firm, there are no fees unless the client wins. And you may have wondered, what’s the catch?

Technically, there is no catch. Those ads are simply referring to contingency fee agreements. That’s when the obligation to pay a lawyer’s fee is only triggered by a positive result — for example, winning the case or negotiating a settlement. The fee is usually a percentage of the amount awarded to the client.

But not all contingency fee agreements are created equal. It’s important to read any agreement carefully, and think about it before you sign on the dotted line.

Here are some things to watch out for, if you’re a potential client, reviewing a contingency fee agreement:

LEGALESE

Some contingency fee agreements are long and laced with unneeded verbiage like “heretofore” and “aforementioned”. Such language can get in the way of understanding what a client is agreeing to.

If the language is confusing, it’s okay to ask for clarification before you sign, says Ben Millard, a partner at Symes Street & Millard.

“At the end of the day, a retainer agreement is like any other contract. You need to read it and understand it before you sign it,” says Millard. “Lawyers can be the worst culprits when it comes to stacking agreements with legalese and jargon.”

It’s not necessarily that lawyers are trying to trick their clients, Millard says. Many lawyers use that kind of elevated language in the rest of their legal work, and for some, it becomes second nature. They may not even realize that their clients are getting lost in it.

STEPPED AGREEMENTS

In some retainers, the percentage payable to the lawyer changes depending on the stage of the case. In those agreements, the percentage may be low in the early stages of litigation, but increase sharply if the case doesn’t settle quickly.

“There’s nothing inherently wrong with these types of agreements,” Millard says. “But people need to be clear about what they’re signing up for, and not stop reading after the first number.”

Every case is a little bit different, and so it’s difficult to know at the outset to know whether your case can be resolved quickly, or whether it might take longer. In other words, it’s hard to know at the beginning of your case whether you’ll be paying the lower percentage, or something higher.

“There are really two issues with stepped agreements,” Millard says. “Firstly, clients can be unclear or misled about what triggers a change in the fee structure. To some extent, that can be addressed if a lawyer clearly walks through the agreement with their client before it’s signed. And secondly, these agreements can put lawyers and their clients’ interests at odds. It can create a tension. For me, I think a transparent, flat rate is fairest, but of course different lawyers have different styles.”

BLENDED FEES

In some agreements, a portion of the legal fees is calculated on a contingency fee basis, and a portion is calculated on an hourly fee basis.

Unlike in an ordinary contingency fee agreement, the client will have to pay some hourly fee even if he or she loses. The upside is that the hourly rate is usually discounted, meaning that it’s less than it would be in a traditional retainer.

“These retainers can be difficult, because the formulas can get quite complex. In my experience, clients appreciate a flat percentage rate, but for those who are thinking about signing a blended fee retainer, the key is to run through a couple of scenarios, to see how each scenario affects the outcome.”

CONCLUSION

There is no doubt that contingency fee retainers can offer real advantages to clients, particularly those who want to avoid paying up front legal fees long before their case has been resolved. But as with any agreement, it is important that you carefully read the retainer and make sure you understand what it says and what the potential outcomes are. And when in doubt it’s okay to ask questions. For more information about the retainer options at Symes Street & Millard, contact us now.

Symes Street & Millard specializes in employment, human rights and administrative law. Contact us at the number above if you would like to discuss your legal options.

Illustration: “Portrait of the Lawyer Hugo Simons” by Otto Dix, Montreal Museum of Fine Arts

 

 

 

 

 

 


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