No win, no fee agreements: pros and cons
Apart from family or criminal matters, many types of claim are suitable for Conditional Fee Agreements, more commonly known as 'no win no fee agreements'. This article sets out the pros and cons of using such agreements.
Pros of no win, no fee agreements:
- Costs are linked to outcome. If you lose, you do not have to pay your solicitor anything (unless you agreed to pay court costs, expert's fees and similar expenses that the solicitor advanced in connection with the case).
- If you take out after the event insurance, you may be relieved from paying your opponents' costs if you lose your case.
- Telling your opponent you've agreed a CFA may encourage earlier settlement because they will know that incurring additional costs by taking your case to court is not likely to be a big concern (since you should have after the event insurance in place to cover such costs).
- In almost all cases, the CFA success fee is paid by the losing party. Thus, any damages you receive will not be affected by it.
- There are major performance (i.e., financial) incentives for your solicitor to win your case, therefore they should work that much harder in order to win your case.
Cons of no win, no fee agreements:
- You must tell your opponent you have agreed a CFA. You must also disclose the risk analysis carried out by your solicitor (i.e., to determine the success fee) to the court and, if necessary, your opponent too. This means that all the potential holes in your case will be exposed.
- A CFA gives your solicitor a financial interest in the case. They also assume control of strategy and resolution of the litigation, and may try to persuade you in taking a decision that you really don't want to take.
- Solicitors are often reluctant to take on difficult cases using no win no fee agreements because of the risk of not being paid.
- Unless you buy insurance to cover the risk of the other party winning, you may have to pay their costs.