Should Indian Lawyers be Allowed to Work on Contingency Basis – Sample Draft Contingency Fee Agreement Format

The Bar Council of India prohibits advocates from charging fees to their clients contingent on the results of litigation or pay a percentage or share of the claims awarded by the Court. Bar Council of India Rules: Part VI, Chapter II, Section II, Rule 20 which reads as under:

“20. An advocate shall not stipulate for a fee contingent on the results of litigation or agree to share the proceeds thereof.” (Rules can be read here.)

Many have the misconception that the reason why lawyers do not work on a contingency basis is

that such an agreement between the lawyer and client would be a wagering one, and therefore are void. Apart from the Bar Council Rules which have expressly prohibited it, in the landmark case of Ganga Ram v. Devi Das, 61 P.R. (1907), such an agreement was held to be void for being against public policy and also against professional ethics.  However, although prohibited, in several cases, especially those before the lower Courts, clients are charged on the percentage of claim amount that the lawyer is able to recover. However, the practice though prevalent, has hardly led to disputes and is can seldom be proved. Reason being that the contingency agreement is always oral and highly informal. It must be remembered that such an agreement is not only void but also would lead to the lawyer facing disciplinary action by the Bar Council and a chance of loosing one’s license to practice at the Bar.

But seeing how Contingency Fee system has worked in countries like the U.S., it is perhaps time to reconsider whether it can be applied. The main reason for the express prohibition in the Bar Council of India Rules is probably because lawyers must not be allowed to have ulterior interests in the outcome of the case. They are considered to be of a ‘noble profession’, and are officers of the Court. Their main objective must be Justice and not financial gain. If they were interested in the matter, they might adopt unfair means or allow their emotions to get the best of them. Sometimes, the Court may grant an alternate remedy then the one paid for, which the contingency agreement does not cover. In such case it is difficult to determine the lawyer’s fee. This may lead to unimaginable amount of disputes between lawyer and client. (Image taken from here.)

Although theoretically this may seem like a very good reasoning, but in practice the Contingency Fee system is a boon to poor clients. There must be several people in India, who even though they have been wronged, do not take legal action because of the legal expenses and the fear that even after somehow being able to meet those expenses, still losing the suit. If the abovementioned rule is removed from the Bar Council of India Rules, then this transaction can be developed. Written and formal documents can come into existence with clear cut clauses for every possible outcome, as well as whether out-of-pocket expenses are also to be paid are also contingent.

Sample Draft Format  Contingency Fee Agreement:

ADVOCATES-CLIENT CONTINGENCY FEE AGREEMENT

This Agreement is made and entered on this ___ day of ________, 20__ by _________________________ (“Client”) and ____________________(“Advocates”) for the purpose of governing their  Advocates-Client relationship.

1.         Scope of Representation.  Client retains the Advocates for the purpose of handling Client’s claim arising from ________________(the cause of action)_________  which took place on _________________(“the Matter”).  This representation involves the representation in Court, investigations, negotiations, due diligence and correspondences relating to the Matter.

2.           Court-Fee Responsibility. Advocates agree to pay such court-fee as is necessary to prosecute the Matter solely as agent for Client.    In the event that no recovery is made, Client shall owe Advocates nothing for services; however, Client shall not owe/still owe Advocates for the sum paid as court-fee

3.         No Guarantees.  Client acknowledges that Advocates have made no guarantees regarding the outcome of the Matter.  Client understands and agrees that should a trial be required, the Advocatess have sole discretion to decide which lawyers or counsel shall attend meetings or represent the Client in Court.

4.         Advocates Fees.  Client agrees that Advocates are entitled to (Percentage) of all sums recovered from any source for Client and shall be calculated inclusive/exclusive of court-fee and out-of-pocket expenses. In the event that a decision giving judgment in this matter is appealed to a higher court, a fee of _____% of the total amount recovered for the Client in this matter, inclusive/exclusive of court-fee and out-of-pocket expenses.

5.         Termination of Client-Advocate Relationship.  Both Client and Advocates have the right to the Advocates/Client relationship at any time, for any reason, on reasonable notice to the other.  If the relationship is ended by Client or Advocates, Advocates shall be entitled to Advocates shall be entitled to a reasonable fee for services rendered up to the time of discharge, which reasonable fee shall not be less than ___________. Provided that if the relationship is terminated by the Client at such time, that the Matter has been substantially performed____________________________________________________

6.         Jurisdiction.  The parties agree that in case any dispute arising from or in relation to the terms, conditions this agreement arises, it shall be subject to the jurisdiction of _____________.

7.         Law. The parties hereby agree that the terms and conditions shall be construed in accordance with Indian Law.

8.         Breach.  In the event of a breach of this Agreement, the non-defaulting party shall be entitled to its reasonable Advocates fees as well as such sum paid as court-fee and out-of-pocket expenses.

9.         Headings. The headings of the terms and conditions herein contained are inserted for convenience of reference only and are not intended to be part of or to affect the meaning or interpretation of any of the terms and conditions of this Agreement.

10.       Severability. In the event that any of these terms, conditions or provisions shall be determined by any competent authority to be invalid, unlawful or unenforceable to any extent, such term, condition or provision shall to that extent be severed from the remaining terms, conditions and provisions which shall continue to be valid to the fullest extent permitted by law.

11.       Notices. Any notice to be given by either party to the other may be sent by recorded delivery to the address of the other party as appearing herein or such other address as such party may from time to time have communicated to the other in writing and if so sent shall be deemed to be served ten business days following the date of posting.

12.       Mode of Payment. Client agrees that all sums received by Advocates on account of the Matter shall be deposited to ______________

13.       Duplicate Agreement.  This Agreement shall be executed in duplicate with each party receiving an executed original.

CLIENT ACKNOWLEDGES THAT THEY HAVE READ THIS AGREEMENT, THAT THE ADVOCATES HAVE EXPLAINED THE TERMS AND CONDITIONS, ANSWERED ALL THE CLIENT’S QUERIES REGARDING THE AGREEMENT AND HAVE GIVEN SUFFICIENT TIME TO THE CLIENTS TO READ, UNDERSTAND AND OBTAIN THIRD-PARTY ADVICE.  CLIENT AGREES TO BE BOUND BY THE TERMS OF THIS AGREEMENT. 

            DATED this ________ day of ______________________, 2012.

____________________________________

Client

____________________________________

Advocates

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