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

  • the scope of your services is clear; 
  • your liability is limited; and 
  • that you get paid. 

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. The 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.

Scope 

You will need to provide a detailed description of the services that you intend to provide. The more detailed this scope is, the better. 

This will be particularly important if disputes arise regarding the outcome of your services. If a client questions whether you completed the services that you promised, you could point to the scope as evidence that you provided everything that you said you would. 

Deliverables Are you providing deliverables along with your services? For instance, you might provide: 

  • reports; 
  • a summary of your advice; or 
  • a strategy document. 

If so, you should list these additions in the ‘Deliverables’ section.

Exclusions  While it is important to set out what you are providing, it is equally important to set out services you are not providing. This is particularly true if you have not accounted for such services in the fees your client is paying you. 
Fees The fees section should outline the costs or rates at which you will provide your consulting services. 
Timeframe Are you providing ongoing consulting, consulting for a particular timeframe or a particular project? It needs to be clear when your services start and finish because this will affect your rights and liabilities. This may also impact whether or not you get paid. 

2. Payment Terms

Your consulting agreement needs to be very clear about how payment will work. This will ensure that you get paid the right amount at the right time.

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 clients will need to pay you within the timeframe set out on your invoice. 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 have not received the correct fees.

It also needs to be clear whether you will be charging for any additional expenses you incur when providing the 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 have developed 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 held by you or your client; and
  • new IP created by you 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 will continue to own new IP and improvements, you will need to give your client a licence to use such IP so that they can benefit from the services you have provided. If you plan to assign new IP and improvements to your client, this assignment should not occur until your client has paid you for your services.

4. Dispute Resolution

Despite your intention to minimise the risk of disputes by having a clear consulting agreement in place, they can still arise. It is important to have a dispute resolution clause in your agreement, which will set out the steps that 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 the services that you provide. 

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. 

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. 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 would like assistance reviewing or drafting your consulting agreement, contact LegalVision’s contract lawyers on 1300 544 755 or fill out the form on this page.

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