A contingency fee is a payment arrangement in which a lawyer's compensation is conditional on a successful outcome, typically calculated as a percentage of the client's recovery. If the case is lost, the client generally owes no attorney's fees, though may still be liable for court costs and expenses. Typical percentages in the United States range from roughly 25% to 40%, with one-third being common in personal injury matters; the exact share often varies by case stage (pre-trial settlement vs. trial vs. appeal).
The arrangement is most associated with plaintiff-side litigation in the United States, particularly personal injury, medical malpractice, product liability, employment discrimination, and class action cases. It functions as a form of access-to-justice financing: claimants who cannot afford hourly rates can pursue meritorious claims, while lawyers screen out weak cases because they bear the risk of nonpayment.
Many other jurisdictions historically prohibited contingency fees as a form of champerty or maintenance. England and Wales banned them in contentious matters until reforms introduced Conditional Fee Agreements (CFAs) under the Courts and Legal Services Act 1990, and later Damages-Based Agreements (DBAs) under the Legal Services Act 2007 and Jackson reforms implemented in 2013. Canada permits contingency fees in all provinces, with Ontario allowing them since 2004. Most civil-law jurisdictions in continental Europe restrict or prohibit pure pactum de quota litis arrangements, though variations exist.
Ethical rules typically prohibit contingency fees in criminal defense and domestic relations matters (e.g., ABA Model Rule of Professional Conduct 1.5(d)), on the theory that aligning lawyer pay with conviction-avoidance or divorce outcomes creates perverse incentives. Critics argue contingency fees encourage frivolous litigation and inflate awards; defenders counter that they democratize access to courts and discipline lawyers to take only winnable cases. The model is also increasingly used by third-party litigation funders financing commercial disputes and investor-state arbitration.
Example
In the 1998 Tobacco Master Settlement Agreement, private plaintiffs' firms representing U.S. state attorneys general worked on contingency and ultimately received billions of dollars in fees from the $206 billion settlement.