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Can a business dispute be handled on a contingency fee in California? Yes. Here is what the law requires, how the fee and the costs are figured, and which cases fit.
Reviewed by David Gammill, California trial attorney · Last reviewed: October 28, 2026
A contingency fee is a fee paid out of the recovery. The lawyer is paid an agreed percentage of whatever the case produces, by settlement, judgment, or verdict, and is paid nothing if the case produces nothing. The arrangement is standard in personal injury cases and uncommon in business cases, but nothing in California law limits it to injury work. This guide explains the statute that governs contingency fee agreements, Business and Professions Code section 6147, how the fee and the costs are calculated in a business case, the alternative structures lawyers use, why most business litigation is still billed hourly, which disputes tend to fit a contingency arrangement, how fee-shifting statutes change the math, and the questions a client should ask before signing.
This is general information about California law. The terms of any particular arrangement are set by the written agreement between the client and the lawyer.
Short answer: Yes. California permits contingency fees in civil matters generally. The Rules of Professional Conduct prohibit them in only a narrow set of matters, none of which is a commercial dispute, and the statutes cap the rate in only one category of civil claims, medical negligence, under Business and Professions Code section 6146. A breach of contract, fraud, partnership, or fiduciary duty claim is subject to none of those limits. The fee is whatever the client and the lawyer agree to in a written contract that meets the requirements of section 6147.
The reason contingency fees are rare in business litigation is economic, not legal. Business cases take longer, cost more to develop, and are defended by parties who can afford to litigate. A firm that takes one on contingency is betting its own time and money on the outcome. Most business litigation firms prefer not to make that bet and bill by the hour instead. A smaller number of firms take select business cases on contingency, usually trial firms that are comfortable carrying risk to a verdict.
Section 6147 governs every contingency fee contract in California other than workers’ compensation agreements and the merchant collection claims described in the next section. It requires the contract to be in writing, requires the attorney to give the client a signed duplicate at the time the contract is made, and requires the contract to state five things.
The consequence of noncompliance is in subdivision (b): failure to comply with any provision of the section renders the agreement voidable at the option of the plaintiff, and the attorney is then entitled to collect a reasonable fee. In practice that means a client who was never given a compliant written agreement can set the percentage aside and have a court decide what the work was worth. Subdivision (c) excludes contingency fee contracts for the recovery of workers’ compensation benefits from the section entirely.
Section 6147.5 takes a narrow class of business claims out of section 6147 and its companion, section 6148. It applies to contingency fee contracts for the recovery of claims between merchants, as defined in the Commercial Code, arising from the sale or lease of goods or services rendered, or money loaned, in the conduct of a business or profession, where the merchant hiring the lawyer employs ten or more people. For that class, no written contract is required, and when there is no written contract the statute sets a sliding fee schedule with percentage limits and small minimum charges.
The exception exists for routine commercial collections: a supplier chasing an unpaid invoice, a lender collecting a business loan. It is the reason a reader should not treat section 6147 as universal. It is also why a trial firm that takes business cases on contingency will usually decline routine merchant collections; the statutory schedule for the no-contract case is built for volume collection work, not for a contested lawsuit. A contract dispute between businesses that is not a simple collection on goods, services, or a loan, or where the plaintiff employs fewer than ten people, is outside the exception and back under section 6147.
The percentage is whatever the agreement says. Market practice in business cases is not published the way personal injury rates are, and this guide does not state a market figure. What the agreement must do is make the arithmetic clear, and the arithmetic turns on three questions.
A contingency fee can be calculated on the gross recovery, before costs are deducted, or on the net recovery, after costs are deducted. The difference matters. Suppose a case settles and the costs advanced by the lawyer were substantial. If the fee is a percentage of the gross, the lawyer takes the percentage of the full settlement and the costs are then repaid from the client’s share. If the fee is a percentage of the net, the costs are repaid first and the percentage is taken from what remains. The net method produces a smaller fee and a larger client share from the same settlement. Section 6147 requires the agreement to say which method applies.
Some agreements use a single percentage for the life of the case. Others step the percentage up as the case advances, with one rate if the case settles before a lawsuit is filed, a higher rate after filing, and a higher rate still if the case is tried. Tiered agreements reward the lawyer for the additional risk and work of later stages. Either structure is lawful; the agreement must state the one chosen.
This is the question clients most often fail to ask. Under a pure contingency arrangement the client owes no attorney fee if the case produces nothing, but the costs are a separate matter. Some agreements make the client responsible for costs regardless of outcome; others provide that the lawyer absorbs the costs if the case is lost. Section 6147 requires the agreement to state how costs affect the client’s recovery, and a careful client reads that term for the no-recovery case, not just the win.
Costs in a business case are larger and less predictable than in most injury cases. They typically include court filing fees, service of process, deposition reporters and transcripts, document collection and electronic discovery vendors, expert witnesses on liability and damages (forensic accountants, industry experts, valuation experts), mediator fees, and trial exhibits and technology. In a contested commercial case the expert and discovery costs alone can be substantial.
Who pays them as they are incurred is a term of the agreement. In a conventional hourly engagement the client pays costs as billed. In a contingency engagement the lawyer may advance all costs, advance some and bill the client for others, or require the client to fund a cost deposit. A lawyer who advances costs is making a second bet on the case in addition to the fee, and that is one more reason contingency business work is selective: the firm has to believe both that the case will win and that the recovery will cover the investment.
Whatever the arrangement, it has to be in the written agreement, and the client should understand it before signing. Advancing costs is not the same as waiving them; an agreement can provide that advanced costs are repaid from the recovery, and most do.
Between pure hourly and pure contingency sit several structures that business litigants use.
Any of these can be lawful if it is in writing and the terms are clear. A hybrid that includes a contingent component is a contingency fee contract for purposes of section 6147 and must contain the section 6147 statements. An hourly or flat-fee engagement is governed instead by section 6148, which is discussed below.
Three reasons, and a client evaluating a contingency offer should understand all of them, because they are the same reasons a contingency lawyer will be selective.
The flip side is that a firm willing to take a business case on contingency has evaluated the case against each of these risks and decided the claim is worth the bet. A client who is offered a contingency arrangement is being told something about the case.
Lawyers who take business cases on contingency tend to weigh the same factors. None is a rule, and the weight each carries depends on the case.
Common claim types that meet these factors include breach of a written contract, breach of fiduciary duty and partnership disputes, fraud and misrepresentation, interference with contract or prospective economic advantage, and unpaid commissions or earned compensation under a written plan.
California follows the American rule: each side pays its own lawyer unless a statute or a contract says otherwise. Several statutes and most commercial contracts say otherwise, and a fee award on top of the recovery changes the economics of a contingency case.
Under Civil Code section 1717, in any action on a contract where the contract specifically provides that attorney fees and costs incurred to enforce it shall be awarded either to one of the parties or to the prevailing party, the party who is determined to have prevailed on the contract is entitled to reasonable attorney fees in addition to other costs, whether or not that party is the one the clause names. The statute makes a one-sided fee clause reciprocal. The court fixes the amount, and the fees are an element of the costs of suit. Most commercial contracts contain a fee clause, which means the prevailing plaintiff in a contract case can often recover its fees from the defendant.
Some statutes award fees to a successful plaintiff as part of the remedy. In the employment setting, Labor Code section 1102.5 authorizes the court to award reasonable attorney fees to a plaintiff who brings a successful retaliation action; the firm’s guide to wrongful termination in California covers that statute. In public-interest litigation, Code of Civil Procedure section 1021.5 allows a court, on motion, to award attorney fees to a successful party in an action that has resulted in the enforcement of an important right affecting the public interest, when a significant benefit has been conferred on the general public or a large class of persons, the necessity and financial burden of private enforcement make the award appropriate, and the fees should not in the interest of justice be paid out of the recovery.
A fee award is paid by the losing party; a contingency fee is paid by the client out of the recovery. When both exist in the same case, the written agreement has to say how they combine. Common approaches: the lawyer takes the greater of the contingency fee or the fee award; the fee award is added to the recovery and the contingency percentage is applied to the total; or the fee award offsets the contingency fee dollar for dollar. Each produces a different result for the client. Section 6147 requires the agreement to address compensation for matters arising out of the relationship, and a fee award is one of them. Ask before signing.
Non-contingency engagements have their own statute. Business and Professions Code section 6148 requires a written contract in any case not covered by section 6147 in which it is reasonably foreseeable that the total expense to the client, including attorney fees, will exceed one thousand dollars. The contract must state the basis of compensation, including hourly rates, statutory fees or flat fees, and other standard charges; the general nature of the legal services to be provided; and the respective responsibilities of the attorney and the client. Failure to comply makes the agreement voidable at the client’s option, and the attorney is then entitled to a reasonable fee.
Section 6148 does not apply to services rendered in an emergency, to a fee implied by prior services of the same kind that the client paid for, to a client who knowingly states in writing after full disclosure that a writing is not required, or to a client that is a corporation. That last exception matters in business litigation: a corporate client hiring a lawyer on an hourly basis is outside section 6148. The corporate exception is in section 6148, not section 6147; a contingency fee contract with a corporate client is still governed by section 6147.
Ten questions, each of which the agreement should answer in writing.
A lawyer who answers these questions clearly, and whose agreement matches the answers, is complying with section 6147. A lawyer who will not answer them is telling you something too.
No. The only statutory caps on contingency fees in California are for medical negligence claims under section 6146 and for the no-written-contract merchant collection claims under section 6147.5. A business case is subject to neither; the fee is whatever the parties agree in a compliant written contract.
Yes, under section 6147, with the exception for certain merchant collection claims under section 6147.5. An oral contingency agreement outside that exception is voidable at the client’s option, and the attorney is then limited to a reasonable fee.
Yes. Section 6147 contains no exception for corporate clients; the corporate exception is in section 6148, which governs non-contingency agreements.
A contingency fee is paid only out of the recovery. A hybrid fee combines a reduced hourly rate, paid as billed, with a smaller contingent share of the recovery. Because it has a contingent component, a hybrid agreement must meet the section 6147 requirements.
Yes, and the agreement must say so. Section 6147 requires every contingency fee contract outside the section 6146 category to state that the fee is not set by law but is negotiable between attorney and client.
That depends on the agreement. Civil Code section 1717 lets the prevailing party recover reasonable fees from the losing party, but the agreement between the client and the lawyer decides how that award and the contingency fee combine. Ask the question before signing and make sure the answer is written down.
Section 6147 requires the attorney to provide a signed duplicate copy of the contract at the time it is entered into. Failure to comply with any provision of the section makes the agreement voidable at the plaintiff’s option.
No. Because the lawyer is paid only from the recovery and often advances the costs, contingency lawyers take the business cases that meet the factors described above: provable liability, measurable damages, a defendant that can pay, and a client prepared to go to trial if necessary.
The firm takes select business disputes on contingency in Los Angeles County; its approach and its fee terms are described on the Los Angeles business litigation page. For contingency fees in personal injury cases, which follow a different market pattern, read the firm’s guide to no-win, no-fee agreements. For the fee-shifting provisions of the Labor Code in retaliation cases, see the guide to wrongful termination in California.
David Gammill is a former Los Angeles County Deputy District Attorney who has tried over 100 cases to verdict, first as a prosecutor and then as a trial lawyer for injured people. Every case is different, and past results do not guarantee a similar outcome. Gammill Law Accident & Injury Lawyers is in Torrance and takes select business disputes on contingency throughout Los Angeles County. Consultations are free, there is no fee unless the firm recovers, and the firm takes calls in English and Spanish. Call 310-750-4149 or request a free case evaluation.
This guide is general information about California law, not legal advice for any specific situation, and it is attorney advertising. Reading it or contacting the firm does not create an attorney-client relationship. Fee terms are set by the written agreement in each matter; statutes change; consult a licensed California attorney about your own circumstances.