What Is a Contingency-Based Relationship?

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In the world of written business contracts, contingency is an important concept. A contingency means that payment is due upon the performance of a specified task, or upon reaching a goal. There are many different forms of contingency agreements, and not only in the world of business.

Business Contracts

  • A contingency relationship exists when one party agrees to pay the other party, or carry out some other action, upon completion of a task. A publisher, for example, may agree to pay an author upon completion and delivery of a book manuscript. In real estate, a buyer may make completion of a sale contingent on the sale of his prior home. In addition, temporary workers known as "contingent employees" work for staffing firms, not for the companies where they actually spend their time and labor.

Legal Contracts

  • Contingency agreements are also prominent in the legal field. Many lawyers work on a contingency basis. For example, a personal-injury lawyer may claim a percentage of recovered damages or liability payments, but only if the payments are made. A Social Security disability lawyer charges a percentage of back benefits owed to a client, but only if the client wins the claim. Lawyers offer contingency agreements because many clients are unable, or unwilling, to pay an (often expensive) hourly fee for the work, and the potential reward of a successful case outweighs the risk of earning nothing.

Education

  • Schools and universities have also taken up contingency agreements. Some students are signing agreements to complete homework, or achieve a minimum grade point average, in order to earn some kind of benefit or reward. For younger students, the reward may be a book, or a useful item such as a compass or calculator that can help them in their work. For older students, attainment of a goal can mean earning a scholarship, or a waiver of prerequisites to an advanced class.

Families

  • Contingency relationships and agreements have also entered the private home. Parents seeking positive behavior from their children may draw up an agreement and set down rewards for specified outcomes, or improvements. Dr. Phil and other popular media advice figures have been advocating such agreements for many years, believing they provide an incentive for kids to better themselves and a way for parents to keep firm control of their household.

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