What is a Contingency-Fee Agreement? “No Win, No Fee” Explained
Considering a “No Win, No Fee” Lawyer?
In South Africa, legal costs often prevent many people from pursuing justice, especially in cases like personal injury, medical negligence, or unfair dismissals. Contingency-fee agreements, also known as “no win, no fee” agreements, offer a way for clients to access legal representation without having to pay upfront legal fees. But how do these agreements actually work, and what are the risks or protections for both the client and attorney?
The Contingency Fees Act
A contingency-fee agreement is a contract between a client and their attorney where legal fees are only payable if the client succeeds in their case. These agreements are governed by the Contingency Fees Act 66 of 1997.
Under the act:
- Attorneys may charge up to 25% of the total amount awarded, or twice their normal fee, whichever is lower.
- The agreement must be in writing and signed by both the client and attorney.
- These agreements are mostly commonly used in personal injury, medical negligence, and unfair dismissals.
Notably, contingency-fee agreements are not allowed in criminal or family law matters (e.g., divorce, maintenance, custody).
The law requires, inter alia, that the agreement specifies:
- The proceedings to which the agreement relates;
- The circumstances in which the legal practitioner’s fees and disbursements relating to the matter are payable;
- What will be regarded by the parties to the agreement as constituting success or partial success; and
- The estimate risk and potential outcome.
Client vs. Attorney Realities
Contingency-fee agreements have become a vital access point to justice for clients who cannot afford traditional legal fees. From a client’s perspective, this structure removes the immediate financial burden, but it’s crucial that clients understand the terms – especially how much of their award might be deducted as fees if they win.
From the law firm’s perspective, contingency work carries a financial risk, as the attorney invests time and resources with no guaranteed return. As a result, attorneys often take on cases with strong prospects of success and carefully vet potential clients and claims.
There is also a reputational benefit: these agreements often demonstrate a law firm’s confidence in its ability to secure a favourable outcome.
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Final Thoughts:
Contingency-fee agreements play a critical role in enabling access to justice in South Africa. While they provide relief to clients who cannot afford upfront legal fees, they must be approached with careful legal compliance, transparency, and ethical consideration.
As seen in our vision statement on the ABOUT US page, Berg & Ferrero Attorneys Incorporated uses contingency-fee agreements as part of our aim to expand access to quality legal services in rural communities, empower clients through proactive legal guidance, and lead with innovation, reliability, and respect for every person we serve.
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Have More Questions?
Can I negotiate the percentage charged in a contingency-fee agreement?
Yes, contingency fees can sometimes be negotiated, but they must comply with the limits set by the Contingency Fees Act. It’s important to discuss fees clearly with your attorney before signing.
Are contingency fees tax-deductible for clients in South Africa?
Tax treatment of contingency fees can vary. Generally, legal fees related to acquiring or defending income may be deductible, but it’s best to consult a tax professional for specific advice.
How do contingency-fee agreements affect damages awarded in court?
The attorney’s fee is deducted from your awarded damages as per the agreement, meaning you receive the net amount after fees. Understanding this split helps manage expectations.
What should I look for before signing a contingency-fee contract?
Ensure the agreement is in writing, clearly states the fee percentage, defines what counts as “success,” and outlines any additional costs. Transparency protects your interests.
Can contingency-fee agreements be used for commercial or business disputes?
While common in personal injury and certain civil claims, contingency fees may be available for some commercial disputes, but they’re often less common and subject to legal restrictions.
How long does a typical contingency-fee legal case take to resolve?
Case duration varies widely depending on complexity, court schedules, and negotiation processes. Your attorney should provide an estimated timeline based on your specific matter.
