contingency fee

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contingency fee

a fee for legal services that depends upon success and is related to that success. Such charging schemes are permitted in (among other places) the USA, Canada, Spain and Germany. A contingency fee proper is a fixed fee that is paid only on success. A fee that is a share of the litigation in the event of success might be treated differently.

In England, a conditional fee agreement has been permitted in English law since 1990, providing the case does not relate to criminal, family or children cases. Such an agreement allows that fees are payable only if the action is won.

No win, no fee’ is a marketing slogan that can be used by lawyers. It can equally be used by unqualified claims handlers who may or may not refer the cases to solicitors. What the phrase conceals is that the claimant may face the costs of his opponent if the claimant is unsuccessful - indeed, normally the claimant may have to pay disbursements or outlays such as for medical reports. Recently, the more generous ‘no win, no cost’ has been seen, which means that the claims handler or lawyer will cover disbursements and cover the costs of the opponent, albeit perhaps by funding an insurance premium. Both of these, however, do not mention the consequences of winning. A claims handler may take a percentage of the damages regardless of the fact that very little work has been done. The uplift (or increased fee) when a case is won on a ‘no win, no fee’ basis is called a success fee, and it is a fee because it is related to the work done, albeit uplifted. Some solicitors may take a substantially uplifted success fee or take a contracted work rate. In both cases the claimant has to pay money for the claims service from his damages. Where a lawyer charges a normal fee, both in England and Wales and in Scotland, it is not uncommon for the claimant to recover all or most of his legal costs and be able to keep his damages. In Scotland, a pactum de quota litis (‘a promise of a share of the action’) is ex facie illegal and unenforceable so far as lawyers are concerned. Curiously, it has been held in Scotland that unqualified unregistered claims handlers are free to take a share of the action. However, since statutory reform in 1990, the charging of an increased fee of up to 100 per cent if the action is successful is permitted to lawyers. These fees are known as speculative fees.

In the USA it is possible for any share of the proceeds of the litigation to be the subject of agreement on condition that no charge is made if the action is not successful. Note, however, that in the USA, as opposed to the UK, there is no basic rule that the loser pays the winner's costs.

Collins Dictionary of Law © W.J. Stewart, 2006
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