Types of Fee Arrangements
The three most commons types of fee arrangements are:
- Time Billings
- Contingent Fees
- Flat Rate
Time billing is when the client is charged for the amount of time the lawyer and their staff spend on the client's case. Time billing is the most common form of fee arrangement.
Contingent fees depend on the outcome of the case. This means that the attorney is paid a fee out of the proceeds collected on the client's behalf. This type of fee arrangement is most common in cases where the client has been injured, but is sometimes used in other cases. Attorneys are not allowed to have a contingent fee arrangement in most family law matters.
Flat rates are sometimes used in instances where the client is faced with a relatively well-defined problem, and the attorney can estimate, in advance, how much time and effort is likely to be required. With a flat fee arrangement, the client and attorney will agree upon a single, final price for the case before any work is done. Flat fee arrangements are most often used in uncontested divorces, incorporation of small businesses, simple wills, and simple bankruptcies. Where there is a significant amount of disagreement, or a complicated situation, it is usually not possible for the attorney or the client to know in advance how difficult the problem will be.
In any type of fee arrangement, it is common for the attorney to require an advanced payment for some fees and expenses. This is often called a "Retainer."
Factors That Determine Lawyers' Fees
The Rules of Professional Conduct, which govern the conduct of lawyers, provides guidelines to be considered in setting legal fees. Among these include:
- The time and effort involved
- Difficulty of the case and the skill needed to conduct it
- Results obtained for the client
- Whether or not the matter is contingent on recovery
- Customary charges of other lawyers for similar services
- How frequently the client works with the attorney
The Rules of Professional Conduct also point out to lawyers that the legal profession is a branch of the administration of justice, and not merely a money-making trade.
In certain types of cases the court may impose a statute or award attorney fees and costs when one party is successful. These are most often wage claim cases or civil rights cases (filed under the Equal Employment Opportunity Act or the Americans with Disabilities Act.)
Attorneys will usually take the following factors into account when charging clients:
Time and Effort. Lawyers will keep accurate records depicting the time that they, other lawyers, and sometimes office staff, spend on your case. Different attorneys value their time at different rates based upon their experience, subject knowledge, and skills. There is, however, a degree of uniformity based on what other lawyers in the community charge.
Ability, Experience, and Reputation. The ability, experience, and reputation of the attorney you choose are going to have an effect on the fees that you may be charged. If you lawyer has the reputation of being an expert or specialist in a specific type of law, then the attorney may charge you more than a lawyer with less experience in that field.
Results. The results obtained from your case can also be a factor in your fees. No lawyer can guarantee their results in a contested matter, and as such most lawyers will expect to be paid regardless of the outcome of the case. In instances of a contingency fee, the lawyer will take a percentage of the recovery award, but only if the case is won. If the case is lost, then the lawyer is paid nothing for the work done. Contingency fee cases are generally set up for cases involving personal injury or damages.
Frequent Clients. Your lawyer will likely take into consideration how frequently you have utilized their services. Similar to other businesses, Lawyers may reduce their charges for clients that they have worked with on numerous occasions.
Other Considerations. As with any other professional service, an attorney must consider office expenses and overhead. An attorney's effort is supported by the efforts of a variety of others. The fee arrangement can include separate charges for secretarial, clerical, and other assistance.
Types of Cases
- Accident Cases. Lawyers are prohibited from instigating or financing litigation. However, to avoid the old English system of making the lawyer available only to the rich, lawyers in the United States are permitted to accept employment in the handling of claims where their compensation will be paid only from recovery made in the case. If there is no recovery, the lawyer gets no fee. The client, in any event, must pay the court costs and certain other expenses, such as those for expert witnesses. This fee arrangement, as previously mentioned, is called a "contingent fee." It is most commonly used in personal injury claims. Such fees range from 25% to 50%, depending on the nature and type of case involved. The percentage agreed upon usually depends on the probability and amount of recovery. No lawyer is required to accept a case on a contingent basis. This is a matter of agreement in each case between the lawyer and the prospective client. This agreement should be in writing and should be made at the time the lawyer agrees to handle the case. Both the client and the lawyer should have copies of the contingent fee contract.
- Wills and Estate Planning. A client may want a simple will or may require a more comprehensive program of estate planning involving insurance, investment, home and business ownership, and various other complicated details. In either will or estate planning, the lawyer must make inquiries into the nature of the client's assets, personal and family situations, and individual desires. The amount of time that is required (and the lawyer's fee) is largely determined by the size of the estate and the complexity of the questions involved. In the simplest situation it would cost relatively little to have a will drawn by a lawyer. In situations where the lawyer might spend more time and resources working on a complex will or estate plan, the fee would be substantially higher. In either case, the benefits to be gained are well worth the investment.
- Probating an Estate. When a person who owns real estate or personal property dies, with or without a will, then the estate might have to be "probated." Maximum fees for the lawyer's service in these cases are set by Montana law, and are based on a fixed percentage of the amount involved. A judge may allow additional fees in cases where extraordinary work and problems arise.
- Dissolution of Marriage. The legal problems involved in dissolution of marriage proceedings vary greatly. In some cases, they are relatively simple. Other cases can involve difficult legal problems having to do with custody of children, financial settlements, the division or dissolution of property, and many other factors that may seriously effect the future lives of a number of people. The time and effort required of an attorney in a dissolution of marriage case, and therefore the fee, will vary greatly from case to case. In instances where a client cannot afford to pay their attorney, the court may order one party to pay the other party's fee. However, if the designated party does not pay the fee, the other party may still be obligated to pay the attorney.
- Property Transactions. The purchase or sale of your home or other property may well be the largest single business transaction you will ever have. Therefore, it is important that you have the best legal advice before you sign an earnest money contract or any other form of agreement. You may have your attorney draft or review the documents involved in the sale, and attend the closing. Your attorney will always be willing to explain how the fee will be determined.
- Advice and Counsel. When a lawyer charges for "advice" it does not mean an off-hand personal opinion. A lawyer's advice is a conclusion, based upon years of training and experience, reached only after gathering and analyzing the facts after hours or days of research and study of the law. Such advice and counsel is usually charged for on an hourly basis.