Legal Fee Structures Explained

The client pays for time spent, so the client carries the risk that the matter takes longer than expected. It is the most flexible structure and the least predictable, which is precisely why clients dislike it and why it survives on unpredictable work.

An hourly rate on its own says very little. What matters is the rate multiplied by the hours, and the hours depend on who does the work - a task done by a senior lawyer at a high rate can cost less than the same task done slowly by a junior.

A fixed fee moves the overrun risk to the firm. The client gets certainty; the firm gets the upside if the matter runs smoothly and absorbs the cost if it does not.

A capped fee is a hybrid - hourly billing up to a ceiling. It gives the client a worst case while leaving the firm paid for actual time below it, and it is common where the scope is broadly known but not precisely.

A retainer can mean money held on account against future fees, drawn down as work is done and topped up when it runs low. That is an advance payment, not a fee.

It can also mean a periodic payment securing availability or a defined level of ongoing service. Those are quite different arrangements, and confusion between them is a routine source of disputes about what has been paid for.

Under a contingency or conditional arrangement the firm is paid a share of the recovery, or an uplifted fee, and is paid little or nothing if the matter fails. The firm takes the outcome risk in exchange for a larger share of a successful result.

Availability is regulated and varies enormously. Some jurisdictions permit them broadly, some restrict them to particular claim types, and some prohibit them outright in certain areas such as family and criminal work.

Court fees, expert reports, searches, filing costs, transcripts and travel are usually charged in addition to the professional fee, under any structure. A fixed fee is rarely fixed for these.

They can be substantial on litigated matters - sometimes exceeding the professional fee - so a quoted figure that does not state its treatment of disbursements is not a complete quote.

The structure, the scope it covers, what happens when the scope changes, who performs the work and at what rates, how disbursements are handled, and how and when invoices are issued.

Most fee disputes are scope disputes wearing a different hat. A written engagement letter setting out what is and is not included prevents more of them than any discussion about the rate.