Conditional Fee Agreements Practical Law: An Overview
Conditional Fee Agreements (CFAs) are becoming an increasingly popular way for individuals and businesses to fund legal proceedings. Under a CFA, the lawyer`s fees are only payable if the case is successful. If the case is unsuccessful, the lawyer will not receive any fees, but the client may still be liable for other costs, such as disbursements and the other side`s legal fees.
CFAs are a form of “no win, no fee” arrangement, which means that there is no financial risk to the client in pursuing a claim. This is particularly attractive to those who may not be able to afford the cost of legal proceedings upfront.
Practical Law is a trusted resource for lawyers and legal professionals looking for practical guidance on legal issues. This article will provide an overview of CFAs and their practical application in the legal industry.
Types of Conditional Fee Agreements
There are two types of CFAs: the “traditional” CFA and the “damages-based” CFA (DBA).
A traditional CFA is an agreement where the client agrees to pay the lawyer`s fees only if the case is successful. If the case is unsuccessful, the client is not liable for any fees, but may have to pay other costs, such as disbursements and the other side`s legal fees.
A DBA is an agreement where the lawyer`s fees are calculated as a percentage of the damages awarded in the case. If the case is successful, the lawyer will receive a percentage of the damages as their fee. If the case is unsuccessful, the lawyer will not receive any fees, but the client may still be liable for other costs.
DBAs were introduced in the UK in 2013 and are becoming more common. However, they are subject to strict rules and limitations, and are not suitable for all types of cases.
Advantages of Conditional Fee Agreements
CFAs offer several advantages to clients and lawyers:
1. No financial risk: The client does not have to pay any fees upfront and is only liable for costs if the case is successful.
2. Access to justice: CFAs enable individuals and businesses to pursue legal proceedings that they may not be able to afford otherwise.
3. Motivation: CFAs incentivize lawyers to work hard on behalf of their clients, as their fees are dependent on the success of the case.
4. Transparency: CFAs provide clarity on the costs of legal proceedings, as the lawyer`s fees are agreed upon upfront.
Disadvantages of Conditional Fee Agreements
There are also some disadvantages to CFAs:
1. Limited availability: CFAs may not be available for all types of cases, and lawyers may decline to take on a case if they do not believe it has a high chance of success.
2. Other costs: While the lawyer`s fees may be covered by the CFA, the client may still be liable for other costs, such as disbursements and the other side`s legal fees.
3. Increased fees: CFAs may result in higher fees for successful cases, as the lawyer`s fees will be a percentage of the damages awarded.
Conclusion
Conditional Fee Agreements are a valuable tool for enabling access to justice and reducing financial risk in legal proceedings. However, they are not suitable for all types of cases and may result in higher fees for successful cases. Legal professionals should carefully consider the benefits and drawbacks of CFAs before recommending them to clients. Practical Law provides useful guidance on the practical application of CFAs, and can help lawyers navigate the complexities of this area of law.