Conditional versus contingent fees: Litigation expenditure incentives

Many jurisdictions in the UK and Australia now allow conditional fees to be struck between a lawyer and their client. While both conditional and contingent fees are outcome-contingent, only under the former is the lawyer's remuneration a function of inputs. The public policy arguments put forwa...

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Bibliographic Details
Published in:International review of law and economics 2006-06, Vol.26 (2), p.180-194
Main Author: Hyde, Charles E.
Format: Article
Language:English
Subjects:
Attorneys
Australia
Compensation
Conditional fees
Contingent fees
Costs
Customers
Expenditure
Expenditures
Fees & charges
Jurisdiction
Law
Legal fees
Litigation
Litigation expenditure
Public policy
Studies
United Kingdom
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Summary:Many jurisdictions in the UK and Australia now allow conditional fees to be struck between a lawyer and their client. While both conditional and contingent fees are outcome-contingent, only under the former is the lawyer's remuneration a function of inputs. The public policy arguments put forward for each fee structure hinge importantly on litigation expenditure incentives. We show that conditional (contingent) fees are not better suited to the English (American) rule of fee-shifting. We also show that whether conditional fees result in higher or lower expenditure than contingent fees depends crucially on whether the inputs to litigation are determined by the lawyer or the client. If the latter, then conditional fees result in (weakly) lower expenditure than contingent fees. If the lawyer determines inputs then expenditure is higher under conditional fees.
ISSN:0144-8188
1873-6394
DOI:10.1016/j.irle.2006.08.002