How Are Legal Fees Determined?
You and your lawyer can negotiate almost any type of fee agreement. There are a few common fee agreements. The “right one” depends on the nature of the case, its complexity and your ability to pay. Besides any fee you pay for your first meeting with a lawyer, you may be offered a fixed, hourly, contingency, or statutory fee. You can agree to any one or a combination of these fees.
Fixed Fee – This type of fee, sometimes called a “standard fee,” is used most often for routine legal matters. For example, a lawyer may charge all clients the same set amount to draw up a simple will or to handle and uncontested divorce. When you agree to a fixed fee, be sure that you know what it does and does not include. You should also find out if any other charges might be added to the bill.
Hourly Fee – Many lawyers charge by the hour and will track and bill time spend working for you. This includes time spent answering your phone calls, doing research, preparing documents, talking to the other side’s lawyer, going to court and so on. The hourly rate can vary widely from lawyer to lawyer. To know approximately how much your total bill will be, ask the lawyer to estimate the amount of time your case will take. Also, remember that circumstances may change, and your case may take longer to handle than the lawyer expected at the beginning.
In addition, a lawyer may request a retainer fee as a “down payment” on any legal services you will need. This means that the legal fees will be deducted from the retainer, at the agreed upon hourly rate, until the retainer is used up. Then, the lawyer will either ask you to replace the retainer or bill you for any additional time spent on your case.
Contingency Fee – This kind of fee is frequently used in accident, personal injury and other cases where you are seeking money damages. A contingency fee agreement means that you will pay your lawyer a certain percentage of the money you recover if you win your case or if you settle out of court. If you lose, the lawyer does not receive a fee. Win or lose, you will have to pay any court costs and expenses related to your case. Because these expenses can be quite high, especially when you need to have doctors or other experts as witnesses, you should ask your lawyer to estimate the case’s expenses and costs. Lawyers are allowed to pay these costs and expenses in the first instance as long as they are repaid at the conclusion of your case. Some lawyers will ask you to pay the expenses as they arise, since there is no guarantee you will win your lawsuit, despite the best efforts of your lawyer.
All contingency fee agreements related to a state court must be in writing. The agreement must state what percentage of the money recovered will be paid to the lawyer and whether this percentage is figured before or after costs and expenses are deducted. Some agreements provide for a varying percentage depending on whether the case is settled, goes to trial or has to be appealed. If so, these varying percentages must be stated in the agreement as well. The NH Rules of Professional Conduct [Rule 1.5 (c)] require lawyers to keep their fees reasonable, taking into consideration many circumstances. Factors include but are not limited to the amount involved and the results achieved, the skill required to perform the legal service properly; the time and labor required. Before you enter into a contingency fee agreement, your lawyer must explain that you may retain his or her services under a different type of fee agreement.
Statutory Fee – The lawyer’s fee for some legal work is set by law or agency regulation. For certain matters, the court either sets or must approve the fee you will pay. In other cases, such as civil rights and consumer protection matters you may be awarded the reasonable cost of your lawyer’s fees as one of your damages. You are, however, always responsible for paying your own lawyer’s fees in the first instance.
While only contingency fee agreements must be in writing, it is recommended that you have a written fee agreement for your case. The fee agreement should include the lawyer’s hourly rate, and if appropriate, an explanation of the general nature of the services that the lawyer will provide and who is responsible for the expenses.
It is impossible for a lawyer to know exactly how much time your case will take. You can ask the lawyer to include a written fee agreement an estimate of the costs and time involved. You should keep in mind that many unexpected factors may affect the lawyer’s fee and that the actual cost may be greater than the estimate. You may want to negotiate a limit on your total fees to protect you from these uncertainties.
If you have an hourly fee agreement, you should request frequent bills that break down time spent on each task and describe the work performed. If you are billed monthly or quarterly, every time you get a bill ask yourself whether you’ve received fair value for what you are being asked to pay. If not, talk it over with the lawyer. Since these fees are coming out of your pocket, it is important that you deal with your lawyer in a businesslike fashion until you are satisfied with the services rendered and their costs.