# Contingency fee engagement letter: the written terms Rule 1.5(c) asks for

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By [Arthur Teboul](/authors/arthur-teboul), Founder, DokuTrak. Published 2026-11-04, updated 2026-11-04.

> **In brief:** A contingency fee engagement letter is a written agreement, signed by the client, that sets the lawyer’s percentage at each stage of the case. It also says which costs come out of the recovery, whether before or after the fee, and which costs the client owes even after a loss.

## The template: Contingency fee engagement letter

**Not advice.** This page is general information, not tax, legal or HR advice. Rules change: check the cited source and ask your own professional before you rely on it. Last reviewed October 25, 2026.

Set the percentages and the cost order, then check the whole letter against your state’s fee rule, which may cap percentages or require added wording. Not legal advice: have it reviewed once before first use.

```text
[Law firm name]
[Firm address]
[Date]
[Client name]
[Client address]
Re: Contingent fee agreement, [claim description, date of incident]

Dear [Client name],

What we will handle
You hire [Law firm name] to pursue your claim against [other party] arising from [incident] on [date]. This agreement does not cover [an appeal, a property damage claim, collecting a judgment] unless we agree in writing.

Fee by stage
Our fee depends on the result. If there is no recovery, you owe no fee. If there is, our fee is: [percentage] of the recovery if the claim is resolved before a lawsuit is filed; [percentage] if it is resolved after filing; and [percentage] if it is resolved at or after trial, or after an appeal is filed.

Case costs
Case costs include filing and service fees, medical records charges, expert fees, deposition and transcript costs, and investigator fees. We will advance them and recover them from any recovery.

Order of deductions
Case costs will be deducted [before / after] our percentage is calculated. Example: on a settlement of [amount] with costs of [amount] and a fee of [percentage], [show the fee and your share under the order chosen].

Costs if there is no recovery
If there is no recovery, you [will not / will] have to repay the case costs we advanced. [If you will: you will repay them within (number) days of the end of the case.]

Liens and repayment claims
Medical liens and claims by insurers or health plans for repayment will be paid from your share of the recovery before we pay you. [We will try to negotiate them down.]

Settlement
Only you can agree to a settlement. We will tell you about every offer and give you our advice.

What we need from you
Within [number] days, please send: the accident or incident report; photos; your insurance policies; proof of lost wages; a list of every doctor and facility that treated you; and a signed medical records authorization for each provider, which we will prepare to meet federal privacy rules. Keep us informed of new treatment, a change of address, or any contact from the other side.

Co-counsel (optional)
We will work with [co-counsel firm], who will receive [share] of the fee [in proportion to the work it performs / and will assume joint responsibility with us for your case]. Your total fee does not increase. By signing, you agree to this division and to the share each firm receives.

If you end our engagement
You may end this agreement at any time. If you do, and you later recover on this claim, we will be paid the reasonable value of the work we did, as state law allows, from that recovery.

If we withdraw
We may withdraw from your case as our professional rules allow, for example if you ask us to act unlawfully or do not cooperate. We will give you reasonable notice and time to find another lawyer, and we will ask the court’s permission where it is required.

Fee disputes (optional)
If we disagree about our fee, we will first try to settle it directly. [Your state bar may offer a fee arbitration program; we will tell you about it in writing.]

Your file (optional)
We will keep your file for [number] years after the case ends, then destroy it unless you ask for it before then.

Closing statement
At the end of the case, we will give you a written statement of the outcome and, if there is a recovery, showing the amount paid to you and how it was calculated.

Client signature required
This agreement takes effect only when you sign it. Please read it, ask us about anything unclear, and keep a signed copy.

Sincerely,
[Attorney name], [Bar number]
[Law firm name]
Signature: ____________________   Date: __________
I have read and agree to this contingent fee agreement.
Client: [Client name]   Signature: ____________________   Date: __________
```

Download: [Word](https://dokutrak.com/downloads/pseo-v2/f2-engagement-letters/contingency-fee.docx) · [PDF](https://dokutrak.com/downloads/pseo-v2/f2-engagement-letters/contingency-fee.pdf)

## What the rule asks the letter to say

A **contingent fee** is a fee that depends on the outcome, usually a share of what the client recovers. This page quotes Minnesota’s Rule 1.5 as one example of a state fee rule. It requires a contingent fee agreement in a writing signed by the client ([Minnesota Rules of Professional Conduct, Rule 1.5, Fees](https://www.revisor.mn.gov/court_rules/rule/prcond-1.5/)). Your own state may add wording or caps, so check it before you send the letter.

The rule then lists what the writing must state. Use the table as your checklist and keep the clauses in the same order, so a reader can match them.

| Required term | Clause in the template | Rule text |
| --- | --- | --- |
| Method of the fee, with the percentage at settlement, trial and appeal | Fee by stage | Rule 1.5(c) ([Minnesota Rules of Professional Conduct, Rule 1.5, Fees](https://www.revisor.mn.gov/court_rules/rule/prcond-1.5/)) |
| Expenses deducted from the recovery | Case costs | Rule 1.5(c) ([Minnesota Rules of Professional Conduct, Rule 1.5, Fees](https://www.revisor.mn.gov/court_rules/rule/prcond-1.5/)) |
| Whether expenses come off before or after the fee | Order of deductions | Rule 1.5(c) ([Minnesota Rules of Professional Conduct, Rule 1.5, Fees](https://www.revisor.mn.gov/court_rules/rule/prcond-1.5/)) |
| Expenses the client owes whether or not they win | Costs if there is no recovery | Rule 1.5(c) ([Minnesota Rules of Professional Conduct, Rule 1.5, Fees](https://www.revisor.mn.gov/court_rules/rule/prcond-1.5/)) |
| A written statement of the outcome and the payout | Closing statement | Rule 1.5(c) ([Minnesota Rules of Professional Conduct, Rule 1.5, Fees](https://www.revisor.mn.gov/court_rules/rule/prcond-1.5/)) |
| Signature of the client | Signature block | Rule 1.5(c) ([Minnesota Rules of Professional Conduct, Rule 1.5, Fees](https://www.revisor.mn.gov/court_rules/rule/prcond-1.5/)) |

## Costs: who advances them and when they come off

Case costs are the money spent to pursue the claim, such as filing fees, medical records, expert fees and deposition transcripts. A lawyer may advance court costs and litigation expenses, and repayment may depend on the outcome ([Minnesota Rules of Professional Conduct, Rule 1.8, Conflict of Interest: Specific Rules](https://www.revisor.mn.gov/court_rules/rule/prcond-1.8/)). The letter should say which applies: does the client repay advanced costs after a loss, or not?

The order of deductions changes the client’s share, so state it plainly. If costs come off first, the percentage applies to a smaller number, and the client keeps more. If the fee comes off first, the costs then come out of the client’s part. Put a worked example in the letter, with real-looking numbers, so the client sees the difference before signing.

Medical liens and insurer claims for repayment also come out of the recovery. Say that they are paid from the client’s share before it is distributed, and whether the firm will try to negotiate them down.

## Matters where a contingent fee is not allowed

The rule bars two kinds of contingent fee outright. One is a fee in a domestic relations matter that depends on securing a divorce or on the amount of alimony, support or a property settlement ([Minnesota Rules of Professional Conduct, Rule 1.5, Fees](https://www.revisor.mn.gov/court_rules/rule/prcond-1.5/)). The other is a contingent fee for defending someone in a criminal case ([Minnesota Rules of Professional Conduct, Rule 1.5, Fees](https://www.revisor.mn.gov/court_rules/rule/prcond-1.5/)).

Tax practitioners face their own limits. Circular 230 § 10.27 limits contingent fees on IRS matters to the cases it lists, such as the IRS exam of an original return or a claim tied only to interest or penalties ([31 CFR 10.27, Fees (Circular 230)](https://www.law.cornell.edu/cfr/text/31/10.27)). A 2014 court ruling narrowed it: the IRS cannot enforce it against fees for preparing and filing an ordinary refund claim before any exam ([Ridgely v. Lew, D.D.C. 2014, memorandum opinion](https://www.govinfo.gov/content/pkg/USCOURTS-dcd-1_12-cv-00565/pdf/USCOURTS-dcd-1_12-cv-00565-1.pdf)). CPAs face a stricter line in the AICPA code: no contingent fee for preparing an original or amended return or a refund claim, and no contingent fee for any service to a client whose statements the firm audits or reviews ([AICPA Code of Professional Conduct, Contingent Fees Rule (ET 1.510.001)](https://pub.aicpa.org/codeofconduct/ethicsresources/et-cod.pdf)). If your firm does both law and tax, keep the tax work on a different fee basis.

## The records the client gives you

Injury cases run on records the client controls. The letter should list them and give a date for each, for example within two weeks of signing. Typical items are the accident report, photos, insurance policies, proof of lost wages and the names of every treating provider.

Medical records need a signed authorization. A **HIPAA authorization** is the client’s signed permission for a provider to release health records to a named recipient. It must describe the information, name who may disclose it and who receives it, state the purpose, carry an expiration date or event, and be signed and dated ([45 CFR 164.508, Uses and disclosures for which an authorization is required](https://www.ecfr.gov/current/title-45/subtitle-A/subchapter-C/part-164/subpart-E/section-164.508)). It must also tell the client of the right to revoke it in writing, whether treatment can be conditioned on signing, and that disclosed records may be redisclosed, all in plain language ([45 CFR 164.508, Uses and disclosures for which an authorization is required](https://www.ecfr.gov/current/title-45/subtitle-A/subchapter-C/part-164/subpart-E/section-164.508)). Send one per provider, with the letter, so records requests can start on day one.

## If the client fires you, and the closing statement

Clients may change lawyers. The letter should say what you are owed if that happens and the case later succeeds. Your state may limit the fee to the reasonable value of the work done, so write it that way and check your state’s rule.

Say also when you may withdraw. Minnesota, for example, lets a lawyer withdraw in the cases its Rule 1.16 lists, such as when withdrawal has no material adverse effect on the client ([Minnesota Rules of Professional Conduct, Rule 1.16, Declining or Terminating Representation](https://www.revisor.mn.gov/court_rules/rule/prcond-1.16/)). If you share the fee with a lawyer outside your firm, the split must follow the work done or each lawyer must take joint responsibility, and the client must agree to each share in writing ([Minnesota Rules of Professional Conduct, Rule 1.5, Fees](https://www.revisor.mn.gov/court_rules/rule/prcond-1.5/)).

A **closing statement** is the written statement you give the client at the end, showing the outcome and, if there was a recovery, the payout and how it was worked out ([Minnesota Rules of Professional Conduct, Rule 1.5, Fees](https://www.revisor.mn.gov/court_rules/rule/prcond-1.5/)). Attach a sample to the letter. It doubles as the worked example of the cost order, and it shows the client exactly what the end of the case will look like.

## Questions people ask

### Must a contingency fee agreement be signed by the client?

Yes. Under rules such as Minnesota’s Rule 1.5(c), a contingent fee agreement must be in a writing signed by the client and must state how the fee is calculated ([Minnesota Rules of Professional Conduct, Rule 1.5, Fees](https://www.revisor.mn.gov/court_rules/rule/prcond-1.5/)).

### Are costs taken out before or after the lawyer’s percentage?

Either is allowed, but the agreement must say which ([Minnesota Rules of Professional Conduct, Rule 1.5, Fees](https://www.revisor.mn.gov/court_rules/rule/prcond-1.5/)). Deducting costs before the percentage leaves the client a larger share.

### Which cases cannot be taken on a contingency fee?

A fee contingent on securing a divorce or on the amount of alimony, support or a property settlement, and criminal defense ([Minnesota Rules of Professional Conduct, Rule 1.5, Fees](https://www.revisor.mn.gov/court_rules/rule/prcond-1.5/)). State law may add others.

### Can accountants charge contingent fees for tax work?

Only in limited cases. Circular 230 allows them for certain IRS matters, such as an exam of an original return ([31 CFR 10.27, Fees (Circular 230)](https://www.law.cornell.edu/cfr/text/31/10.27)). The AICPA code bars them for preparing returns or refund claims, and for any service to an audit or review client ([AICPA Code of Professional Conduct, Contingent Fees Rule (ET 1.510.001)](https://pub.aicpa.org/codeofconduct/ethicsresources/et-cod.pdf)).

## Sources

- [Minnesota Rules of Professional Conduct, Rule 1.5, Fees](https://www.revisor.mn.gov/court_rules/rule/prcond-1.5/): A contingent fee agreement must be in a writing signed by the client stating percentages, expenses, their order and costs owed regardless; a closing statement is required; divorce and criminal defense contingent fees are barred.
- [Minnesota Rules of Professional Conduct, Rule 1.8, Conflict of Interest: Specific Rules](https://www.revisor.mn.gov/court_rules/rule/prcond-1.8/): A lawyer may advance court costs and litigation expenses, with repayment contingent on the outcome.
- [45 CFR 164.508, Uses and disclosures for which an authorization is required](https://www.ecfr.gov/current/title-45/subtitle-A/subchapter-C/part-164/subpart-E/section-164.508): A valid authorization has the core elements (information, who discloses and receives it, purpose, expiration, signature and date) plus statements on the right to revoke, conditioning and redisclosure, in plain language.
- [31 CFR 10.27, Fees (Circular 230)](https://www.law.cornell.edu/cfr/text/31/10.27): Contingent fees are barred on IRS matters except for the cases listed, including exams of original returns and interest or penalty claims.
- [AICPA Code of Professional Conduct, Contingent Fees Rule (ET 1.510.001)](https://pub.aicpa.org/codeofconduct/ethicsresources/et-cod.pdf): A member may not prepare an original or amended tax return or claim for a tax refund for a contingent fee, nor perform any service for a contingent fee for a client whose financial statements the firm audits or reviews.
- [Ridgely v. Lew, D.D.C. 2014, memorandum opinion](https://www.govinfo.gov/content/pkg/USCOURTS-dcd-1_12-cv-00565/pdf/USCOURTS-dcd-1_12-cv-00565-1.pdf): The court held that the IRS lacks statutory authority to regulate fees for preparing and filing ordinary refund claims, filed after the original return and before an audit, and granted a permanent injunction.
- [Minnesota Rules of Professional Conduct, Rule 1.16, Declining or Terminating Representation](https://www.revisor.mn.gov/court_rules/rule/prcond-1.16/): A lawyer may withdraw in the listed cases, including when withdrawal can be accomplished without material adverse effect on the client.

## More on this topic

- [Retainer engagement letter](/templates/engagement-letters/retainer)
- [Non-engagement letter](/templates/engagement-letters/non-engagement-letter)
- [Engagement letter templates by service](/templates/engagement-letters)

## About the author

Arthur Teboul (Founder, DokuTrak) is building DokuTrak after watching professionals lose hours chasing clients for documents over email. [Arthur Teboul](/authors/arthur-teboul).

How this page was made (methodology): it is built from the primary sources listed under Sources, and every rule and figure on it links to the source it comes from. Last updated October 25, 2026. Spotted an error or a rule that changed? [Contact us](/contact).

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