A consulting agreement is a legal agreement between a consultant or business and a client that outlines the scope of work and expectations of their working relationship. The consulting services contract can also lay out the specified rate of compensation and specified time duration of the services.
In all types of consulting, protecting both parties’ investments is important. Whenever a client wishes to retain services, they should first sign an agreement for consulting services to set expectations and agree upon desired outcomes with the business.
The consulting agreement cost will vary from business to business. Still, a contract lawyer can draft a template that consults may reuse with their clients. Below are 14 things to include when writing a consulting agreement.
1. Information of Parties
The opening of every consulting agreement should include a recitals and background section. This is the introductory portion of the contract that outlines who is involved in the working relationship.
The information of all parties should include:
- Their name
- Their role, e.g., the consultant, the agency, or the company
- The name of the clients and their respective businesses
Here is an article that clarifies the role of a business consultant.
2. Scope of Services
The main focus of the consulting agreement is to outline what types of services you will provide to your client. Therefore, the consultant or consulting agency should clearly describe the services they will provide.
Although a general description is permissible, many prefer to include a comprehensive breakdown of their consulting services as an attachment. This ensures there is no confusion or ambiguity surrounding the services that the clients are paying for.
Here is an article to learn more about the various consulting services you may include in your contract.
3. Payment Terms
One of the most common courses of a legal dispute between consultants and clients is payment. Clients may feel they did not receive services they paid for, or consultants may not receive compensation despite fulfilling their end of the contract.
Payment terms outline both parties' expectations and requirements to prevent future disputes. It is advisable for consultants or consulting firms to require a payment for the client to retain services.
Details that you should include are:
- The amount of money the client will pay for services
- The payment structure that you will use, e.g., a one-time payment or monthly payments
- The forms of payments that you will accept
- How you will handle invoicing, receipts, and possible reimbursement
It is important to be as straightforward as possible about how much a client will owe the consultant or agency in total and the timeframe in which they must pay for their services.
Here is an article with more information on how to bill consulting services.
4. Ownership of Intellectual Property
A business’s intellectual property can be a marketing methodology, software design, or sales strategy. Under a sales consulting agreement, the consultant may specify that the methods and techniques they teach a business are granted only for use, not ownership.
The marketing agency can specify full ownership over any methods or techniques in a marketing consulting agreement. Under this clause, the clients can use strategies they are taught but may not market them as their own.
Trademarks, copyrights, and patents also fall under the umbrella of intellectual property. Therefore, the consulting agreement should clarify the ownership of the consultant’s property and its transferability to the client, whether it is creative works or other deliverables.
Here is an article that further explores the limits and applications of intellectual property.
5. Compensation, Expenses, and Schedules
This agreement section outlines how the client will pay the consultant and how content will be delivered to them. It is important to align payments with a measurable time frame. This makes it easier to enforce payment or reimbursement should either party fail to follow the agreement’s schedule.
Every consulting relationship is different, and their agreements should always be personalized to reflect the unique needs of every party. For example, in a real estate consulting agreement, the expenses and schedules for deliverables will likely vary significantly from a software consulting agreement.
Be mindful of your needs and design a schedule and compensation plan that works best for each client.
6. Dispute Resolution
Disputes are not uncommon, and even if you do everything to prevent them, they can still lead to serious losses and damages. With a dispute resolution clause, the consulting contract can outline steps you and the client can take to resolve any future conflict.
You may offer full or partial reimbursement under certain circumstances. You could also allow the client to cancel their contract and waive any further payment responsibilities.
It can also be helpful to consider specific problems that may arise, such as non-payment and breach of contract. You can decide to include certain protective measures for your business, such as making the client pay for your legal fees in the event of a lawsuit.
Here is an article that explores the three main types of dispute resolution.
7. Termination of Services
Although you may try to do everything to keep a client happy, you can never guarantee their 100% satisfaction. They may decide to cancel their contract or end services at any time. To protect your business and profits, you may lay out terms for cancellation.
For example, you may charge the client a cancellation fee or require advance notice to terminate services.
8. Methods of Communication
Methods of communication can ensure a traceable history of interactions between a company. For example, in some cases, a client or consultant could claim they were not contacted in a particular way. But the other party may defer to their consulting agreement and the specified methods of communication as a defense.
In most cases, email is sufficient, but you may request formal letters sent by mail regarding larger investments and projects.
Confidentiality can refer to data collection, personal information, and use. As a consultant, you learn a lot of personal details about your clients, their line of work, and their approach to business. A confidentiality agreement instills trust by assuring their information will remain private.
Indemnification, also known as a hold harmless agreement, protects a party’s liability. It can waive your liability for certain events during your working relationship.
For example, a marketing consultant may indemnify themselves from any lost profits a client sustains while using their marketing strategies to run an ad campaign.
Here is an article that explains indemnification clauses in detail.
11. Limitation of Liability
A limitation of liability prevents the client from suing you or your agency for certain damages. For example, a client’s own negligence or actions can lead to damage that they could sue you for without a limitation of liability.
This clause protects you as a consultant by outlining exactly what actions you are accountable for. More specifically, you only take accountability for the direct results of your actions. So, for example, you will not take legal responsibility for a client’s lost profits, expenses, or other assets.
12. Noncompete Agreement
A non-compete agreement prevents clients from using the consulting services to create a competitive business. For example, while a marketer may hire a marketing consultant to improve their skills, the non-compete agreement will prevent them from using their skills to compete with the firm as a consultant directly.
The non-compete agreement can also limit whom you and your client can work for after your agreement ends. For example, you may not be allowed to provide advice to their competitors or customers and vice-versa.
An enforceability clause ensures the contract is legally valid and contains all the elements law requires to be legally enforceable. For a contract to be enforceable, all parties must be legally competent.
Legal competency refers to someone’s ability to fully understand and agree to the terms laid out in an agreement. Minors and people with mental or intellectual disabilities are often not generally considered legally competent.
Enforceability also protects people from adhering to a contract if they were coerced, pressured, or otherwise forced to sign.
Here is an article that explores enforceability in law further.
14. Signature of Parties
The consulting agreement should close with a blank signature and dateline for each party to sign. Signing parties should include their first and last legal names and relevant professional titles.
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