Champerty Definition and Legal Meaning

On this page, you'll find the legal definition and meaning of Champerty, written in plain English, along with examples of how it is used.

What is Champerty?

(n) Champerty is the agreement or understanding between the plaintiff and the attorney to decide the terms and mode of financing of the suit and sharing of the compensation when it is awarded. It is the method of postponing the advocates fee and tying it up with his performance and outcome of the case

History and Meaning of Champerty

Champerty originated from feudal times in medieval England, and it refers to the act of maintaining a lawsuit in order to get a share in the proceeds. However, champerty is legally construed as the wrongful or prohibited sharing of the lawsuit's proceeds between a non-party and a party. It is typically an agreement between the plaintiff, who cannot afford to pay the legal fees, and a third party, usually a lawyer, who agrees to finance the lawsuit in exchange for a share in the damages awarded.

In many countries, champerty is deemed to be illegal, and the agreements that involve it are considered void or unenforceable. The purpose of the prohibition is to prevent matters of litigation from turning into business transactions, as it may encourage frivolous lawsuits.

Examples of Champerty

Here are a few examples of how champerty might appear in different contexts:

  • An investor agrees to pay the legal fees and other expenses associated with a lawsuit in exchange for a percentage of the proceeds awarded to the plaintiff.
  • An attorney agrees to pay all litigation costs on behalf of a plaintiff in a personal injury lawsuit, in exchange for a portion of the settlement amount if they win.
  • A shareholder pays for legal fees in a derivative lawsuit against a company, and in return, they will receive a percentage of any settlement received from the corporation.
  • An attorney agrees to take a case on a contingency basis, agreeing to finance any expenses associated with the case in exchange for a percentage of the damages awarded at the end of the case.

Legal Terms Similar to Champerty

  • Maintenance: the provision of financial or other support for another person's lawsuit or defense in court.
  • Barratry: an agreement between a plaintiff and an attorney to bring a frivolous lawsuit, often done for financial gain.
  • Usury: the practice of lending money at an exorbitant or illegal rate of interest.