What is Advisory Agreement Drafting?
An advisory agreement is a legal contract that specifies the working relationship between a company and an external expert, such as a business consultant, financial advisor, or marketing consultant.
It has to provide details about what services the advisor will provide and how they will be compensated.
If you need to draft an advisory agreement, read the rest of this article for core components it should contain, tips for drafting it, and why hiring a lawyer to draft your document is advisable.
What Key Terms Should Be in an Advisory Agreement?
An advisory agreement must contain the following core terms:
- Services scope. Break down all the specific work that needs to be conducted.
- Compensation. Explain how the expert will be paid, such as via hourly rates.
- Confidentiality. Since private business information will be shared, the agreement should contain non-disclosure rules.
- Intellectual property (IP). State that the company owns the work to prevent disputes.
- Deliverable deadlines. Make sure you identify deadlines for deliverables to meet the agreed-on quality standards.
- Conflicts of interest. Be clear about whether the advisor is allowed to work with the company’s competitors or not.
- Dispute resolution. Identify a dispute-resolution method, such as arbitration or mediation, that will be used to resolve disagreements between parties.
- Termination. Explain notice periods and other requirements for ending the agreement early. Include any terms that survive termination, such as those regarding confidentiality.
How Should You Draft an Advisory Agreement?
To protect you against future disputes, make sure you consider some important tips when drafting an advisory agreement.
Specify the Advisory Services
If you don’t clearly define exactly what the advisor will do, down to the details, you risk an open-ended work scope that can create confusion. It can also make disagreements over compensation trickier to resolve.
Verify Compensation
Important information to consider when drafting the compensation terms in the agreement is the advisor’s employment status. State if the advisor is an independent contractor to prevent misclassification risks, which could create ambiguity over employment benefits.
Define the Equity Grant
If the advisor will be compensated with equity, you want to clearly define the type and amount of equity that’s granted to them, such as stock options. Explain the vesting schedule and cliff. Explain when the advisor will earn the equity and consider what happens to both vested and unvested equity upon termination.
Protect the Company Information
To ensure that the advisor doesn’t disclose or misuse the company’s confidential information, such as customer data, you want to include confidentiality clauses and requirements. Be specific about exactly what information is considered confidential to prevent ambiguity.
It’s also worth keeping confidentiality terms in effect for a defined time after the contract ends so that you minimize your risk of violations.
Include a Non-Solicitation Clause
To prevent the advisor from soliciting company employees or customers, include a non-solicitation clause. This should remain in effect for a clearly defined period after the agreement is terminated.
Do You Need a Lawyer for Advisory Agreement Drafting?
While you might not always need to hire a lawyer to draft your advisory agreement for you, it’s advisable if you want to ensure clarity and reduce legal disputes.
A lawyer will help you during the agreement drafting process by:
- Ensuring the agreement complies with applicable laws and regulations to prevent non-compliance challenges.
- Clarifying the services scope. They’ll define what advisory services are provided and what is excluded from the arrangement.
- Documenting all payment terms, such as fees, expenses, invoicing requirements, and payment deadlines.
- Creating confidentiality provisions. This includes appropriate provisions that will protect the company’s sensitive information from unwanted disclosure.
- Clarifying exactly which party owns intellectual property accessed during the agreement term, such as reports, materials, and other items.
- Establishing when the agreement starts and ends, as well as what enables parties to walk away from it should it no longer serve their interests.
- Avoiding any ambiguous or inconsistent information that could result in misunderstandings or disputes between parties.
- Reviewing an advisory agreement you’ve drafted. By providing an in-depth review of all clauses, a lawyer will identify red flags and make appropriate edits to protect you.
Where to Find and Hire a Lawyer for Advisory Agreement Drafting
If you’ve decided to hire a lawyer to draft your advisory agreement, you might be unsure of where to find one. Online legal platforms make the lawyer search easy by putting you in touch with lawyers who are experienced and have the expertise to help you.
ContractsCounsel is one of the largest online legal marketplaces which gives you access to a curated network of lawyers. All lawyers on the platform have been vetted.
Requesting that a lawyer on the platform drafts your advisory agreement is easy. Here are the steps to follow:
- Visit the ContractsCounsel marketplace.
- Select ‘One-time project’ and ‘Create or update contract.’ If you want an agreement review instead, select ‘Contract review.’
- Post your project. You can include some details about what you require so you can match with suitable lawyers on the platform.
- Wait for bids. Without searching for a lawyer, lawyers on the platform will send you multiple bids to work on your project.
- Review the lawyer information. The platform provides information about the lawyers, such as their location, expertise, experience, and client ratings they’ve achieved for previously published projects completed on the platform.
- Select a lawyer based on their information and hire them to draft your advisory agreement for a flat fee.
