Contingency Fees in Western Australia

Answer choices

1. A

   Bad Match: proportional to contributions5% picked this

   People who join together to share the costs of purchasing lottery tickets on a regular basis agree to share any eventual proceeds from a

   In an uplift fee contingency agreement, the client and the lawyer aren't contributing to the costs of a trial together, in different proportions. The lawyer is doing work for free and only getting paid if they win the case. The payout in the end isn't "proportional to contribution"; it's regular fee + agreed-upon bonus.

   5%
2. B

   Correct74% picked this

   A consulting firm reviews a company's operations. The consulting firm will receive payment only if it can substantially reduce the company's operating expenses, in

   Why this is right

   In an uplift fee contingency agreement, the lawyer is doing work for free and only getting paid if they are successful in winning the case. In this answer, the consultant is only getting paid if they are successful in reducing the company's expenses. The payout for the lawyer is their normal fee plus some agreed upon bonus (an additional percentage of that fee). The payout for the consultant is their normal fee plus 100% of their normal fee (that equals double their normal fee). It might seem like double is a bit excessive, but the passage seems to be suggesting that a lawyer would get their normal fee plus maybe a 30% bonus. But the passage doesn't get specific about what that percentage would be. The crucial point is that the bonus is an agreed upon amount ahead of time, and that the worker only gets paid if successful.

   Skill tested: Analogy · how this choice captures the passage's function is the move to repeat next time.

   74%
3. C

   Bad Match: proportional to risk6% picked this

   The returns that accrue from the assumption of a large financial risk by members of a business partnership formed to develop and market a

   In an uplift fee contingency agreement, the client and the lawyer aren't subjecting themselves to different levels of financial risk. The lawyer is doing work for free and only getting paid if they win the case. The lawyer is the only one undergoing any financial risk. If they lose the case, they make no money for all the time they worked on that case. Since the lawyer is the one undertaking all the financial risk, according to this payout scheme of "the returns will be divided in proportion to the financial risk assumed", that would mean that the lawyer would get 100% of the payout. But we know that's exactly the sort of unfair share of the rewards that the LRCWA was trying to avoid. The payout in the end isn't "proportional to risk"; it's regular fee + agreed-upon bonus.

   6%
4. D

   Bad Match9% picked this

   The cost of an insurance policy is determined by reference to the likelihood and magnitude of an eventual loss covered by the insurance policy

   In this answer, someone is paying money for an insurance policy. In the event that something bad happens, they'll get some money back from the insurance company. But if nothing bad ever happens, then they'll just have paid the insurance company a bunch of money over the years. That's sort of the opposite of the uplift fee. The "customer" doesn't pay any money. The "company" (the lawyer) does all the work for free, unless something good happens (they win the case), at which point the company gets a bunch of money.

   9%
5. E

   Bad Match7% picked this

   A person purchasing a property receives a loan for the purchase from the seller. In order to reduce risk, the seller requires the buyer

   This doesn't involve hiring someone to perform a service for you, and paying them nothing unless they do a good job (in which case they get their normal fee plus a bonus). This is buying a tangible object (property) from someone, while also asking them to loan you the money to buy it, and then being asked to pay money to a 3rd party (the insurance company) to guarantee the loan.

   7%