Conditional fee agreement (CFA)
An agreement between a lawyer (solicitor or barrister) and his/her client where the lawyer is paid a success fee if the claim is successful. ‘Success’ might be achieved through a settlement or following a favourable court award and needs to be clearly spelt out. The success fee is calculated as a percentage uplift on the fee the lawyer would have been paid on a hourly-rate basis (as opposed to e.g. a percentage of the claim proceeds).
CFAs can be 100% CFAs or partial CFAs. If a 100% CFA the lawyer receives nothing unless the claim is successful – ‘no win, no fee’ – and they are rare except in PI litigation. A partial CFA splits the lawyer’s fee into unconditional and conditional parts. The unconditional part is paid in the normal way, probably on a time basis and monthly in arrears. The conditional part is the balance of the normal fee and, like the success fee, is only paid on ‘success’. Partial CFAs can go some way to aligning the financial interests of the client and its legal team (and, if applicable, the funder). Solicitors and barristers have overheads like any business and may not be willing to fund significant claims using their own balance sheet. However, they may be willing to forego part of their income in the short term return for a suitable success fee.
Expert witnesses may not act on CFAs. Sometimes funders will fund the experts’ costs and the like, for example, if the client’s solicitors are acting on a 100% CFA and the adverse cost risk is covered by ATE insurance
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