The fee structure shapes incentives, and matching it to the matter matters more than the headline rate.
Hourly. The default for matters of uncertain scope. Its weakness is that cost is unpredictable and effort is not tied to outcome. Budgets, phase caps and regular reporting address most of that.
Flat fees. Suitable for defined tasks — an opinion, a filing, a transaction of known shape, a defined litigation phase. Requires scope definition and a mechanism for change orders when the matter expands.
Contingent. The firm bears the risk and takes a percentage of recovery. Best suited to affirmative claims with quantifiable damages and a solvent defendant. Percentages should step by stage, and the treatment of costs, of non-monetary relief and of fee awards should be explicit.
Hybrid. A reduced hourly rate plus a success component, which aligns incentives while giving the firm partial coverage. Increasingly common in substantial commercial disputes.
Defence-side alternatives. Fixed monthly fees for a portfolio, capped fees with a collar, and holdbacks contingent on outcome.
Terms to agree in writing. Scope, rates and increases, staffing, expenses, billing frequency and detail, retainer treatment, and termination. Clarity at the outset prevents nearly all fee disputes.