What Is Champertous Contract

A champertous contract refers to an agreement between two parties where one party agrees to fund the litigation of the other party in exchange for a share of the proceeds. In simple terms, champertous contracts involve financial investors or third-party funders who provide litigation financing in exchange for a portion of the settlement or verdict.

Historically, champertous contracts were considered unethical and illegal in many common law jurisdictions. The reason for this is that they incentivize third-party funders to manipulate the litigation to their advantage. Champertous contracts are viewed as a form of gambling or speculation on litigation outcomes, which undermines the integrity of the legal system.

Despite the negative connotations associated with champertous contracts, they have become increasingly popular in recent years. This is because they provide a means for plaintiffs who lack the financial resources to pursue a legal claim to obtain justice. By providing financial support, third-party funders enable plaintiffs to hire experienced attorneys and to pay for legal fees and expenses.

In some jurisdictions, champertous contracts are legal as long as they are subject to court supervision. This means that the court has the authority to regulate the activities of the third-party funder to prevent abuse. For example, the court may require the third-party funder to disclose its funding agreement to the defendant or to limit the amount of money it can recover from the plaintiff.

In conclusion, champertous contracts are agreements between third-party funders and plaintiffs to finance litigation in exchange for a portion of the settlement or verdict. While historically viewed as unethical and illegal, they have become increasingly popular in recent years as a means to provide access to justice for plaintiffs who lack the financial resources to pursue legal action. However, they are still subject to court supervision to prevent abuse and ensure the integrity of the legal system.