What is Consulting Agreement Drafting and How Does it Work?
A consulting agreement is a legally-binding contract signed by a company and consultant. This document provides clarity on the working relationship between parties, such as the work scope and deliverables expected.
Drafting a consulting agreement requires specifics and clarity to prevent disputes or a lack of compliance that can land parties in legal or financial trouble.
Read the rest of this article to explore what should be included in a consulting agreement, how to draft it accurately, and how a qualified lawyer can help you with the process.
What’s Included in a Consulting Agreement?
A consulting agreement usually contains the following core components.
- Work scope. The agreement should include what tasks will be achieved with deadlines for deliverables specified.
- Payment. All payment terms must be clarified. This section includes payment amounts and when they are due to be paid. There should be provisions for how to handle late invoices.
- Ownership. Rights to work content and intellectual property (IP) must be clear so that parties don’t accidentally violate ownership.
- Term and termination. How long the contract will last and whether it’s fixed or renewable will be included in this section. There should be clarity for how either party can end the agreement, such as if there’s a breach.
- Confidentiality. This clause serves to protect sensitive information that’s shared between parties during the agreement, such as trade secrets or IP.
- Dispute resolution. If a dispute arises, there should be clarity about how it will be resolved, such as if parties will go to mediation or arbitration.
What are Pitfalls to Avoid in a Consulting Agreement?
To prevent legal or financial issues with consulting agreements, there are some common drafting mistakes to avoid.
Misclassification
The agreement must clearly state that the consultant is not an employee if this isn’t the case. If there’s ambiguity about how the consultant is classified, it can expose parties to legal risks.
Lack of Jurisdiction
The agreement must specify which jurisdiction’s laws govern it as this will direct how dispute resolution is conducted and ensure it’s fair for both parties.
Work Scope
This is one of the most important clauses to focus on in a consulting agreement. If it’s not clear, there can be a mismatch of goals or expectations.
The agreement must have a detailed outline of the type of support required from the consultant and deliverables they will have to produce, so there’s no confusion.
Confidentiality Issues
To protect your company from sensitive information leaks, the contract should outline what information isn’t allowed to be shared with third parties. It should also specify consequences for violating confidentiality so that the other party knows what to avoid.
Ownership Ambiguity
Besides clarifying who owns the IP created during the agreement term, the agreement should also explain exactly how the consultant is allowed to use it.
Unclear Payment
Specifying how much payment will be provided to the consultant is not enough. There should also be clarity about the chosen payment structure, such as if it’s a fixed rate for each project or hourly rate, so that both parties agree on these terms prior to signing the contract.
To protect the consultant from scope creep, the agreement needs a clause that states they won’t continue providing deliverables if they haven’t been compensated adequately.
No Limitation on Liability
Without a limitation on liability, either party could be liable for various issues that could arise. To prevent this, the agreement should restrict how much can be claimed, such as for third-party actions or profit losses.
No Post-Termination Clauses
Sometimes the working relationship isn’t neatly closed up when the agreement comes to an end. There could be tasks either party has to complete after termination.
For example, IP and confidential information might need to be returned to the rightful owner or payment might need to be made for completed consultant services.
Why Should You Hire a Lawyer for Consulting Agreement Drafting?
Hiring a lawyer to draft a consulting agreement is worthwhile because you want the contract to be legally enforceable and clear to prevent disputes.
Here are some tasks a qualified lawyer will complete for you:
- Include clear classification. A lawyer will structure your consulting agreement so the consultant is clearly classified as independent, responsible for their taxes, not entitled to employee benefits.
- Avoid scope creep. This serves to protect the consultant from situations in which they do more work than they’re compensated for. The lawyer will specify clear deliverables and deadlines, as well as how revisions should be compensated.
- Protect IP. To protect ownership rights, a lawyer will make the agreement clear on who owns work produced prior to and during the contract.
- Prevent conflict of interest. Since some consultants can have a large client base, a lawyer will specify non-conflict clauses and disclosure duties to protect both parties from disputes.
- Provide clarity. A lawyer will avoid dense or confusing language that can risk misinterpretations. Instead, they’ll write every clause so that it’s clear and specific.
- Secure legal validity. A lawyer knows all the relevant laws and regulations, and will ensure that the agreement is compliant with them to prevent legal disputes.
Where to Find a Lawyer for Consulting Agreement Drafting
If you need to hire a lawyer to draft your consulting agreement, you don’t have to cold-call traditional law firms or conduct extensive research that takes you ages to find the best person to help you.
Online legal platforms make the process easier. On ContractsCounsel, one of the largest online legal marketplaces, you’ll have access to a curated network of vetted lawyers who can help you draft your contracts.
All you have to do is ask a lawyer to draft your consulting agreement. Here’s how.
1. Go to the ContractsCounsel marketplace, where you can post your project for free.
2. You’ll receive multiple bids from lawyers directly on the platform.
3. Review the lawyers' profiles based on data provided by the platform, such as their location, client ratings, years of experience, and field of expertise.
4. Hire a lawyer you think is best suited to your requirements to draft your consulting agreement so it’s clear and legal.
