Paralegal Advanced Competency Exam (PACE) Practice Exam

What does the term "contingency fee" mean?

1. A fixed fee regardless of the outcome

2. A percentage of the client's losses

3. A fee based on successful representation

4. A retainer paid upfront

The correct answer is: A fee based on successful representation

The term "contingency fee" refers to a fee structure typically used in legal representation where the attorney’s payment is contingent upon achieving a successful outcome for the client. This means that the attorney will only receive payment if the client wins the case or achieves a settlement. The fee is generally a percentage of the recovery obtained on behalf of the client. This arrangement incentivizes attorneys to work diligently on behalf of their clients because their compensation is directly linked to the results they achieve. It also allows individuals who may not have the funds to pay for legal services upfront to retain legal counsel. Contingency fees are commonly seen in personal injury cases, among others, where the amount recovered can be significant. Alternative options do not accurately define a contingency fee. A fixed fee is not dependent on the case's outcome, while a percentage of the client's losses does not capture the nature of a contingency fee, which concerns successful recovery rather than losses. A retainer refers to an upfront payment for legal services, again differing fundamentally from a contingency fee arrangement.