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ABA Family Legal Guide
When and How to Use a Lawyer
1.4 Legal Fees and Expenses
1.4a Types of Fees
Are all contingent fee arrangements the same?
No. An important consideration is whether or not the lawyer deducts the costs and expenses from the amount won before or after you pay the lawyer's percentage.
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Example: Joe hires Ernie Attorney to represent him, agreeing that Ernie will receive one third of the final amount--in this case, $12,000. If Joe pays Ernie his fee before expenses, the fee will be calculated as follows: | |
| $12,000 | Total amount recovered in case |
| - 4,000 | One third for Ernie Attorney |
| --------------- | |
| $ 8,000 | Balance |
| - 2,100 | Payment for expenses and costs |
| --------------- | |
| $ 5,900 | Amount that Joe recovers |
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| |
| $12,000 | Total amount recovered in case |
| - 2,100 | Payment for expenses and costs |
| --------------- | |
| $ 9,900 | Balance |
| - 3,300 | (One-third for Ernie Attorney) |
| --------------- | |
| $ 6,600 | Amount that Joe recovers |
The above figures show that Joe will collect an additional $700 if the agreement provides that Ernie Attorney collects his share after Joe pays the other legal expenses.
Many lawyers prefer to be paid before they subtract the expenses, but the point is often negotiable. Of course, these matters should be settled before you hire a lawyer. If you agree to pay a contingent fee, your lawyer should provide a written explanation of this agreement that clearly states how he or she will deduct costs.
Copyright © 2004 American Bar Association