Published: 2012-06-22

Types of Pricing for Legal Services: Contingency Fees

After calculating how much your small law practice needs to make a profit and your reasonable hourly rate, you are ready to consider the available pricing options. There are various ways to price your legal services. This article discusses contingency pricing.

Contingency Pricing

Under the contingency pricing model, the fee amount is a percentage of the value of the recovery for the client. As stated above, contingency pricing is usually employed in personal injury cases and other tort cases where there is a reasonably good chance that the client will receive a damage award or settlement for his/her claims.

The standard contingency percentage is 30% of the client's recovery. However, the percentage can be adjusted upward or downward depending on a variety of factors, such as the financial state of the client, the amount of work you actually perform, and/or your desire to provide a competitive discount.

Contingency fees are most commonly requested by clients who cannot afford up-front payments for your legal services. By taking a case on contingency, you accept the risk of not getting paid for your services. Therefore, before agreeing to representation under this pricing model, you should have a substantial level of confidence that the case will result in a settlement or a court award to the client. Otherwise, you may not get paid.

This model does have drawbacks, such as uneven cash flow and potential conflicts of interest between the client and you as to when to settle the case. On the other hand, if your practice area is personal injury, you may be forced to use this pricing model in order to stay in step with the competition.