Types of Legal Fees
Every initial consultation between a lawyer and a potential client begins roughly the same: the lawyer obtains the basic information provided by the client and the parties discuss the potential representation. Once it is clear that the lawyer can be of service to the potential client, the parties then need to agree on a fee arrangement. One common misconception about hiring a lawyer is the necessity of a retainer or a lump sum deposit to begin representation. As explained below, some fee arrangements do not require a retainer at all, but this often depends on the nature and scope of the case.
The hourly fee is the most typical fee arrangement between lawyers and clients. Most lawyers offer their services at a set hourly rate, which can vary widely depending upon a lawyer's experience and area of expertise. Clients can expect a fee agreement that specifies not only the hourly rate, but also, the rate for related matters, such as secretarial or paralegal services, copies, and any out-of-pocket expenses the lawyer may otherwise during the course of representation. Hourly fees are charged in fractions of an hour, usually tenths of an hour or six-minute increments. This allows a lawyer to track his or her time more exactly in relation to the actual worked performed. A retainer is typically required as part of an hourly fee agreement.
The hourly fee arrangement has historically favored financially well-off individuals and businesses that can afford to pay legal fees out-of-pocket regardless of the outcome of the matter. Contingency fee agreements were established in response to these hourly fee arrangements as a means to allow lower-income clients the same access to legal representation. In modern times, contingency fees are primarily used by lawyers that handle personal injury actions. In a contingency fee arrangement, the lawyer gets paid a percentage of the award, contingent upon the outcome of the case. For example, if a client and lawyer agree to a 25% contingency fee, and the client obtains an award of $100,000 at the end of a case, the lawyer gets paid $25,000 of that. Lawyers in each state are subject to ethical rules regarding the permissibility of contingency fee agreements.
Fixed or flat fee arrangements are typically used by transactional lawyers when the scope of representation is clearly defined. For example, a lawyer who commonly represents small business owners with the purchase or sale of real estate usually has a sense of the amount of time involved in each matter. This allows him or her to set a fixed price for the entire legal job because there is a clear beginning and end to the representation. Fixed fees incentivize lawyers to work diligently to produce results within a short timeframe rather than delaying matters in order to increase the number of billable hours. The client benefits by having a clear expectation of the total cost of representation from day one, rather than having to wait to see how many hours the lawyer devoted to his or her legal job.
No matter the type of fee arrangement, both parties benefit from putting the agreement in writing. In fact, lawyers are required to do so in most states. The agreement should be as specific as possible, leaving no room for surprises. The client should review the written agreement very carefully prior to signing it, and should never hesitate to ask questions or clarify any issues before doing so. Clients in need of legal help can quickly and easily find the perfect lawyer for them in just a few minutes by visiting Legal Services Link, and submitting their legal jobs for application by attorneys interested in that work. For more information or to submit a legal job, visit www.LegalServicesLink.com.
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