As a consultant or someone looking to contract a consultant, you must understand how a consultancy agreement will outline the scope of your business relationship. If you are a consultant, you will draft consultancy agreements regularly to contract with new clients with varying needs and expectations. As someone looking to contract a consultant, you will have specific tasks you want your consultant to do and must ensure that your agreement reflects your expectations. This article will take you through the basics of consultancy agreements and key clauses to include in your agreements.
Consultancy Agreements
A consultancy agreement is a contract between a consultant and their client that sets out the terms and conditions of their business relationship. Among other essential terms, the consultancy agreement determines the nature of the work and how much the client must pay.
If there is a dispute, the consultancy agreement will enable parties to review the exact terms of their agreement.
Key Clauses to Include
There are a few key clauses your consultancy agreement should contain.
Duties of the Consultant
Perhaps the most crucial clause of your consultancy agreement is one that outlines the duties of the consultant. If you are reaching out to an external consultant, you will likely have specific needs or issues you wish the consultant to deal with. Equally, as a consultant, you will need to know precisely what it is your client desires you to do so that you do not waste time on tasks that you have not been contracted to perform.
A clearly drafted clause that precisely notes the duties of the consultant will save all parties time and money. It can also prevent disputes from arising over nonperformance.
Duration
Including a clause that sets out the timeframe for your business agreement with a consultant or client is simple but necessary and will eliminate ambiguity about how long the relationship will last. A clear duration clause will ensure that the consultant can manage their time and client load effectively and that the client is not in the dark if they pay the consultant by the day or hour.
Termination Clauses
A termination clause outlines the circumstances under which you can bring your agreement to an end. You can include a range of terms that allow the agreement to end, such as:
- if the consultant fails to perform their promises; or
- if the client fails to pay.
A thoroughly thought-out and well-drafted termination clause is invaluable, as it will allow you, as the consultant or client, to get out of a bad agreement without losing unnecessary time or money.
Substitution
A substitution clause allows the consultant to delegate services to another without violating the consultancy agreement. A clause that deals with substitution is valuable, as it enables the consultant to ensure that someone will perform their services in a situation where they cannot work. As a client, you may want such a clause to ensure that the work you have paid for gets done. On the other hand, it is essential to be clear about your position on substitution if you do not want any consultant working for you other than the one you have contracted. In either case, you must include a clause that deals with substitution.
Continue reading this article below the formThe Importance of Clear Drafting and Negotiation
Clarity is important when drafting a consultancy agreement. The terms of your agreement will determine the course of your dealings with your client or consultant. For this reason, you must ensure that you thoroughly and clearly draft your agreements. A clearly drafted agreement will ensure everyone is totally aware of their rights and responsibilities.
Additionally, if a dispute arises, you can refer back to the terms of your agreement. The negotiation process similarly requires thoroughness. You should bring up everything you want in the agreement so that you and the other party know what each other expects. Likewise, it ensures you can include your expectations in the agreement.
Whether you’re a small business owner or the Chief Financial Officer of an ASX-listed company, one fact remains: your customers need to pay you.
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Key Takeaways
A consultancy agreement sets out the parameters of your agreement with a client or consultant. Key terms to include in your agreement include:
- clauses dealing with the consultant’s specific duties;
- clauses specifying the duration of your business relationship;
- termination clauses; and
- clauses dealing with substitution.
If you need assistance drafting or dealing with your consultancy agreements, our experienced professional services lawyers can assist as part of our LegalVision membership. For a low monthly fee, you will have unlimited access to lawyers to answer your questions and draft and review your documents. Call us today on 1300 544 755 or visit our membership page.
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