Conditional Fee Agreenment (CFA)
Litigation is very much a team effort between solicitor, client, Counsel, and experts if relevant.
In simple terms, a CFA is an agreement between lawyer and client to share the risk by combining the outcome of the case with the fees payable to the lawyer.
There are several ways that a CFA can be formulated.
For example, we might agree to discount our standard fees by a certain percentage (say 35%). If the outcome of the case is unsuccessful, you would only pay 65% of our fees. If the outcome is successful, you would pay a pre-agreed success fee on top of our standard hourly base rate – this is our reward against the risk of not getting paid.
CFAs can help reduce the pressures of litigation by sharing the financial burden of the process with us.
If you’re interested in paying by CFA, we’d discuss this at the outset, typically when we are carrying out an examination of your case. In addition, your opponent would be advised that your exposure to your costs has been reduced by entering into a CFA.
Advantages Of CFAs
- As costs are linked to the outcome of a case there is potential for reduced, or even low, costs to be payable by you if the case is unsuccessful
- There is improved certainty on costs on the basis that you know if you lose the case you will only have to pay the reduced fee and disbursements as provided for in the CFA
- Disclosure of a CFA to your opponent in insolvency cases may encourage earlier settlement, as the other party’s potential liabilities will increase in accordance with the level of the success fee
- In insolvency cases, the success fee will be payable by the losing side, therefore, any damages awarded will not be consumed by the success fee
- We will always have a stake in the litigation. As such, (as ever) our incentive is to achieve a successful outcome
- A CFA sends a clear message to your opponent that you – or at least your legal team – are confident of winning
Disadvantages Of CFAs
- As a CFA gives a lawyer a financial interest in the case, your lawyer will have greater control over the overall strategy and resolution of the litigation
- Unless you purchase ATE to cover your opponent’s costs you still risk being liable to pay their costs if the litigation is unsuccessful
- Unless your claim comes under the insolvency exception, your damages will be reduced by the uplift