Saturday, December 11, 2010

Types of Attorney Fee Agreements

Hiring a lawyer can be an unnerving prospect and certainly a big commitment. And while there are many variations, the most common types of fee arrangements are hourly, contingent and flat fee.

Hourly fee agreements dictate that the attorney will be paid for the time spent on the matter. Hourly rates vary based on expertise, experience, and frankly, how busy an attorney is.  While straightforward, there are a couple of issues to consider beyond the rate. First, are there additional fees packed in as “administrative” or “overhead” charges. A seemingly simple 5% administrative charge raises a $225 per hour lawyer’s actual rate to $236.25 per hour.  Second, is there a minimum time charge?  A minimum .25 hour charge will add up significantly faster than a lawyer that charges in .1 hour minimums.

Flat fees are charged for many services for which the time involved is predictable. These are such things as drafting Wills or deeds, or handling a simple criminal matter or divorce. The fee is generally based on an attorney’s rough approximation of the time involved to typically handle the matter. Many clients like the certainty of knowing the price up front and many attorneys like not having to track their time for flat fee matters.

Contingent fees provide the lawyer a percentage of recovery, typically 1/3.  The attorney in a contingent fee agreement is taking a risk in that they will not get paid unless the client prevails. Thus, many attorneys will not take a case on a contingent fee unless they see a legitimate chance to make money at a higher rate than they otherwise would if they handled the matter on an hourly basis.  Individuals who have small dollar amount claims or who have hard cases to prove will likely have difficulty in finding an attorney to take their case on a contingent fee.   Even if a contingent fee agreement is entered into, clients are still responsible for paying the costs (filing fees, etc) involved in bringing litigation.

Regardless of the fee arrangement used, clients should insist on a written fee agreement and should make sure they are clear as to the types of charges they will be responsible for.
Michigan Legal Intelligence is authored by W. Jay Brown, a Midland Michigan based civil litigation attorney. The foregoing is intended to be for general information purposes only and is not intended to be specific legal advice and does not create an attorney-client relationship between W. Jay Brown PLC and you. Individuals with legal issues are advised to consult an attorney of your own choosing for advice specific to your situation.

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