The contingent-fee, agreement benefits the client by effectively spreading the risk of litigation. An hourly-rate payment agreement requires the client to assume all of the risks because the advocates’ fees are a sunk cost. But under a contingent-fee arrangement, the advocate shares that risk and is only paid a fee if he wins the case or obtains a settlement.
The Texas Supreme Court recently described the benefits of contingent-fee agreements when it wrote:
“This risk-sharing feature creates an incentive for lawyers to work diligently and obtain the best results possible. A closely related benefit is the contingent fee’s tendency to reduce frivolous litigation by discouraging attorneys from presenting claims that have negative value or otherwise lack merit.”
Finally, the contingent-fee agreement has an implicit benefit for the client. The arrangement ensures that the advocate believes in the client’s case and will do the work necessary to obtain a positive result. Faith in the case and the desire to fight for the client may not always be present when advocates are guaranteed payment – without regard to the success or outcome of the case.
A client who retains an advocate through a contingent-fee arrangement, therefore, receives the advocate’s implicit belief that the case has merit.
Some information is drawn from an article posted by Mike Myers.