Lawyers normally charge fees in one
of three ways:
 |
at an hourly rate |
|
|
by a flat rate |
|
|
on a contingency |
An hourly rate is usually preferred
by business clients because they may have several cases that the lawyer is
working on at one time. The lawyer itemizes the time spent on each case and
presents a bill, usually on a monthly basis.
Lawyers will frequently charge a
flat rate when the approximate amount of work involved is known in advance or
when the client needs to know exactly how much the fees will total. Flat fees
are often payable in advance or in installments.
Contingency fees are based on a
percentage of an award or settlement that the lawyer recovers. If the lawyer
does not win the case or obtain a settlement, the client generally does not owe
any fees. Contingency fees are usually one-fourth to one-third of the amount
recovered. In many cases, the percentage is increased if the case goes to trial
or if it is appealed.
Contingency fees have come under
attack lately on the theory that they encourage lawyers to file lawsuits that
may not have any merit. In actual fact, a competent lawyer is not about to take
a case on a contingent basis unless it does have merit. This is because the
lawyer ends up spending his time and paying for expenses to prepare a case
without any guarantee that he will be paid. If he is successful, he may be well
paid for his efforts. If he is not successful, he will have lost a considerable
amount of time that could have been used on behalf of a client who is paying by
the hour.
The contingency fee is also the only
way many potential clients have of hiring a lawyer. If all fees were charged on
a flat rate or by the hour, the man who is injured in an accident and loses his
job would have no means to obtain the services of a lawyer. Most contingency fee
contracts result from personal injury cases. This is because the lawyer can
usually expect more of a recovery if he is successful and because the client is
usually not in a position to pay any other type of fee. Lawyers will sometimes
take other types of cases on a contingency basis, but there usually must be the
potential for a large award. As a general rule, the harder the type of case is
to win, the more potential there must be for a large recovery.
Not all fees fit into a category.
Fees can also be a mixture. For example, fees charged by attorneys in bankruptcy cases are subject to review by the bankruptcy judge. In a personal bankruptcy, the fee allowed will be a flat fee because the judge and attorney will already know how much time is involved and therefore the amount of fee that is likely to be approved. However, the attorney can apply for a larger fee based on unusual circumstances. In a larger or commercial bankruptcy, the fees will be on an hourly basis, but still subject to court approval.
Always ask
for a written contract.
Once the type of fee is determined,
the amount, and how it is to be paid, the lawyer then prepares a contract
spelling out the terms of the employment. If your lawyer does not prepare a fee
contract, ask for one. This is the only way to avoid misunderstandings when it
comes time to pay the bill.