An hourly pricing model is the most common attorney-client payment option. This plan means that you’ll pay the attorney for every hour that you use their service until your matter is resolved. The price per hour is set by the attorney, and can vary drastically based on the attorney’s overhead costs, their experience, and their bandwidth. Whether the lawyer will round up or down for partial hours (and when that threshold is) differs from attorney to attorney.
Paul charges a $300/hr rate that rounds to either side of 30 minutes. If you spend 75 minutes with him, you will be charged $300.
Flat (Fixed) Fee
When you have a case that’s pretty cut-and-dry, lawyers will often offer a flat fee. Most of the time, this payment option is used while drafting standardized legal documents such as wills, uncontested divorces, or business formations. If you are offered a flat fee, be sure to ask exactly what services are covered, as flat fees can often exclude additional expenses such as filing fees.
Paul charges $1,000 for articles of incorporation, excluding filing fees. The filing fees are $10, so you pay a total of $1,010.
Retainers are lump sums that you pay attorneys at the beginning of your relationship to be used for future services/availability. This money sits in a state-regulated escrow account and can only be removed by the attorney once they have given you that amount of value in legal services. Retainers are typically broken up into two categories, and it’s important that you understand which one you are agreeing to. There are 1. ordinary retainer fees (which represent advanced payment for legal services) and 2. non-refundable retainer fees (which typically is allowed when the purpose of the retainer to pay for availability, not future services).
Paul takes a $3,000 ordinary retainer from you for legal services. He provides $2,500 worth of legal advice, and thus removes $2,500 from the escrow account to pay for his services. At the end of your engagement, Paul returns the remaining $500 to you if you’re in an agreement like in the first example above.
Contingency payment options are agreements where the attorney takes no fee from the client up front. Instead, the attorney typically receives either a flat fee and/or a percentage of the total amount received after a favorable court decision. Often times, contingent payment plans are offered in personal injury lawsuits, debt collection cases, or even criminal cases.
You are suing your neighbor for $100,000 in damages and have agreed to pay your attorney a 30% contingency fee. If you do not win the case, you do not pay anything. If you win the case, the attorney receives $30,000 from the $100,000 (30%)
Payment plans are similar to small loans. A third party covers the up-front cost of your attorney, and you pay incremental amount periodically to that person in order to repay the debt. Typically payment plans include interest rates, but if you’re strapped for cash and need an attorney this is a great option.
You work out a payment plan option where you receive $5,000 to cover the cost of an attorney up front. You must make monthly payments of $166 for 36 months (at an 11.99% interest rate) to fully cover the expenses. This option can be ideal for clients who are set on hiring an attorney, but don’t have the funds immediately available.
A capped fee is where attorneys charge you their typical amount (normally in an hourly manner), but are unable to charge more than a specified amount.
Paul charges $300 hourly, but agrees to a capped fee of $3,000. Paul does 12 hours of work for you (which, at his typical rate would be $3,600) and charges you the maximum $3,000.
Holdback fee arrangements are when the client and attorney agree upon performance metrics of which to base the cost of legal advice on. The client and attorney meet in regular intervals to assess the attorney’s performance, and are paid according to how they did compared to the metrics agreed upon. Typically, this type of agreement is only offered for big cases where there will be an ongoing relationship between the attorney and client.
This pricing model varies on a case by case basis. Here is one example:
A blended fee is a combination of two or more payment options above.