Question from a reader:
I have a question about law firms that advertise a “no loss guarantee.” For example, it states that if the compensation received is less than the lawyer’s fees, they will not charge the client. However, is there no case where, after going through civil court, the amount received was less than expected? In that case, I think
the law firm would end up in the red, and I would like to know how that system works. By the way, this question is about Adire.

What is the “no loss guarantee” of law firms? Unraveling its mechanism

Recently, it seems that more people are questioning the term “no loss guarantee” put forth by law firms. In particular, many questions have been directed toward Adire Law Office. I would like to share my thoughts on this matter as well.

How does the “no loss guarantee” work?

First of all, the “no loss guarantee” offered by Adire Law Office essentially means that if the compensation a client receives does not exceed the lawyer’s fees, the firm will not charge the client for the difference. When I first heard this, I couldn’t hide my surprise, thinking, “Is there really such a convenient thing?” However, by understanding the industry’s mechanisms and customs, I began to see the logic and risks behind it. Firstly, I believe that the background of law firms offering a “no loss guarantee” is a measure to alleviate clients’ anxieties. When hiring a lawyer, concerns about how much it will cost and how much compensation can be obtained as a result are significant issues. Therefore, by establishing such guarantees, clients can use the services with peace of mind.

Actual case study

For example, let’s say a client was involved in a traffic accident and consulted with Adire. He felt that the compensation offered by the insurance company was too low and sought help from a lawyer. During negotiations, it is possible that the final compensation settles at a lower amount than initially expected. In this case, the client had the reassurance that he would not have to pay lawyer fees due to the “no loss guarantee.” However, from the law firm’s perspective, there is indeed a possibility that the case could end up in the red. What is important here is how the law firm manages that risk.

Business model of law firms

The business model of law firms is not just about earning fees from clients; it also relies on handling a certain number of cases. Large firms like Adire aim to process numerous cases to earn a certain success fee and ultimately make a profit. Moreover, by managing many cases, lawyers can gain experience in various fields such as traffic accidents, divorce issues, and labor disputes, which can be applied to future cases. In other words, while establishing a “no loss guarantee,” they are diversifying risks by improving overall performance.

Lawyer’s responsibility and its impact

That said, law firms also have a clear obligation to explain matters to clients. If a client receives a compensation amount that is lower than expected, the firm has a duty to clearly explain the reasons for that. To avoid disappointing clients’ expectations, it is crucial to communicate realistic expectations at the initial stage. If I were a lawyer, I would honestly tell clients, “This case might be difficult.” On top of that, I believe it is important to work together to consider what strategies can be devised.

Conclusion

The term “no loss guarantee” from law firms contains efforts to reassure clients. However, behind it lies a lot of risk management and business model ingenuity. Understanding the industry structure is extremely important for clients to make informed choices about services. Ultimately, it is essential for clients to have solid information and communicate with their lawyers, as this will be the key to achieving better outcomes. In my personal opinion, I feel that trust between people is paramount. No matter how excellent a lawyer may be, it is meaningless if communication cannot be established. Thus, considering the “no loss guarantee” provided by law firms is a very important point for clients. I recommend carefully selecting a law firm and finding the best partner for oneself.