6 Things a Consultant Needs in a Consulting Agreement

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Table of Contents

• 1. Commercial Details
• 2. Payment Terms
• 3. Intellectual Property 
• 4. Dispute Resolution
• 5. Liability 
• 6. Termination 
• Key Takeaways
• Frequently Asked Questions 

Before you begin a consulting project, you need to have a clear consulting agreement in place between you and your clients. This agreement will ensure that: 

• the scope of your services is clear; 
• you limit your liability; and 
• you receive payment. 

This will create certainty for you and your client and minimise the likelihood of disputes arising. In this article, we set out six things that you need to include in your consulting agreement. 

1. Commercial Details

You can use a master consulting agreement that you update for each client. This essentially involves making small amendments to a template contract so that it is suitable for each new project. However, you will need to carefully set out the commercial details that differ from client-to-client. These commercial details are often set out on a schedule, which you can attach to the terms and conditions of your consulting agreement.

The table below sets out some of the most important details you will need to establish.

2. Payment Terms

Your consulting agreement should be clear about how payment will work. This will ensure that you receive full payment at the right time.

Accordingly, your client needs to understand exactly: 

• how much you are charging for your services; and
• when payment is due. 

There are a variety of ways you may wish to handle payment. You may choose to charge:

• a fixed-fee for each project;
• an hourly rate; or
• an upfront deposit, with the remainder due on completion of a series of deliverables.

Your client must pay you within the timeframe set out on your invoice. Therefore, it is a good idea to include a clause in your agreement that relieves you of your obligation to continue providing your services if you do not receive the correct fees. Additionally, you should be clear about whether you will charge for any additional expenses you incur when providing consulting services. 

For example, you may choose to pass on the cost of travel, printing expenses or government fees to your client.

3. Intellectual Property 

Whether you have been a consultant for decades or are just entering the field, you will likely develop some of your own intellectual property (IP) which you will use to provide your consulting services. This might include: 

• data; 
• processes; 
• methods; and 
• research. 

To protect your IP from misuse, your consulting agreement needs to set out what happens to any:

• pre-existing IP you or your client hold; and
• new IP you create or improvements to pre-existing IP. 

You should seek to retain the rights to your pre-existing IP that you use as you provide your services. Similarly, your client will want to retain ownership of their pre-existing IP.

In terms of new IP, you will need to decide whether:

• you will own this new IP and license it to your client; or
• your client will own the new IP outright.

If you continue to own new IP and improvements, you will need to give your client a licence to use such IP so they can benefit from the services you provide. If you plan to assign new IP and improvements to your client, this assignment should not occur until your client pays for your services.

4. Dispute Resolution

Despite your intention to minimise the risk of disputes by having a clear consulting agreement, they can still arise. Accordingly, you should have a dispute resolution clause in your agreement. This will set out the steps you and your client must take before initiating legal action. 

A dispute resolution clause will usually state that the parties must discuss the dispute, with the aim of reaching a commercially viable resolution. The next step may be to proceed to mediation. Your agreement should set out: 

• where the mediation will take place; and 
• who the mediator will be. 

5. Liability 

Your clients will want to rely on the information and advice you give them in the consulting services. This means that you will need to take on a degree of responsibility for your services. 

However, you should set a limitation on this liability to minimise your responsibility for any issues that might arise. Importantly, this involves restricting the maximum amount your client can claim from you if you breach the contract. 

You should also exclude liability for events outside of your control, such as: 

• your client’s actions; 
• the actions of third parties; or 
• “consequential loss”, such as loss of profits or business opportunities. 

6. Termination 

Both you and your client will likely enter into a consulting agreement with the intention of meeting their entire obligations under the contract, for the term agreed. However, circumstances might arise where one party wishes to end the consulting relationship. Therefore, you should include a termination clause that governs this process.

For example, if your client is not providing you with the information that you need to do your job, you may wish to terminate the agreement.

Your termination clause will need to set out:

• whether you or your client can terminate the contract earlier than it is supposed to end; 
• how much notice is required to terminate; 
• what each party is required to do upon termination (for example, you can require that each party return the other’s intellectual property and confidential information); and
• that your client will need to pay you for services completed and expenses incurred up until the points of termination. 

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Key Takeaways

Before you begin providing consulting services, make sure that you have a thorough consulting agreement to govern your relationship with clients. This will ensure that you get paid properly and will help to diminish the risk of disputes down the track. In summary, your consulting agreement should include:

• the commercial details of the specific project, including exactly what services you will provide;
• a clause outlining when and how much you should be paid;
• how you and your client will deal with pre-existing and new intellectual property;
• a dispute resolution process; and
• an outline of whether either party can terminate the agreement.

If you need help with non-disclosure agreements, our experienced contract 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.

Frequently Asked Questions