Contingency Fee Agreements in South Africa

Celesté Snyders | SchoemanLaw Inc  

Category: Contract Law 

Introduction  

Contingency fee agreements are a type of fee arrangement commonly used in legal cases where a lawyer is only paid if the matter is successful. In other words, the attorney's fee is contingent upon the case's outcome. 

When to use Contingency Fee Agreements?  

This fee arrangement is often used in personal injury cases, where the Plaintiff may not have the financial means to pay the attorney upfront. Instead, the lawyer agrees to take on the matter and only receives payment if the Plaintiff successfully obtains compensation. 

Is Contingency Fee Agreements beneficial?  

Contingency fees can be beneficial for both the client and the attorney. For the client, it means they can pursue legal action without paying upfront legal fees. For the attorney, it means they are incentivized to work hard on the case and achieve a successful outcome, as their payment is tied to the result. 

In South Africa, contingency fees are governed by the Contingency Fees Act 66 of 19971 (the Act). The Act regulates the maximum percentage that attorneys can charge as a contingency fee, which is currently set at 25% of the amount recovered in the matter.2 The Act also sets out requirements for the lawyer to provide the client with a written agreement outlining the terms of the contingency fee arrangement.3 

There have been both disputes and acceptances of contingency fees in South Africa. One notable case where a contingency fee was disputed was the case of Van Wyk v Lewis.4 In this case, the Plaintiff was awarded R1.4 million in damages, but the attorney's contingency fee was calculated at R5.5 million, which the Plaintiff argued was excessive. The case went to the Supreme Court of Appeal, which ultimately ruled that the contingency fee was unreasonable and reduced it to R1.5 million. 

On the other hand, there have also been cases where contingency fees were accepted. For example, in the Road Accident Fund v Mdeyide,5 the Plaintiff was awarded R1.5 million in damages, and the attorney's contingency fee was calculated at R375,000. The court upheld the contingency fee arrangement, stating it was reasonable and in line with the Contingency Fees Act. 

Conclusion 

Overall, contingency fees can be useful for clients who may not have the financial means to pursue legal action. However, clients and attorneys need to understand the terms of the contingency fee agreement and ensure that it complies with the requirements set out in the Contingency Fees Act.6 Contact an Attorney by contacting SchoemanLaw Inc today! 

Celesté Snyders | SchoemanLaw Inchttps://schoemanlaw.co.za/our-services/contract-drafting/