Consultancy Agreements: Basic Terms and Use Cases
A consultancy agreement is a legally binding contract that affirms a client’s request for guidance and assistance from a consultant. It is an agreement that sets out the terms of service being provided to the client by an independent contractor, the consultant. These agreements can be useful if you are not an expert in a certain area, and need the help of someone who is.
Almost every undertaking a company embarks upon will need the assistance of a consultant. The contract entered by the company and the consultant should be guided and developed through a consulting agreement. A clear agreement will establish the expectations the company has of the consultant, which will in turn protect both parties from future liability stemming from misunderstandings or disputes. This agreement is limited by time constraints, which ensures that certain deadlines are met and the client and consultant are on the same page.
If a client fails to adequately set the terms of the agreement, the consultant could end up carrying out the wrong objectives for the client. The easiest way to avoid such a situation would be to set clear guidelines and scope through a consultancy agreement.
These agreements are free from many statutory obligations and therefore the liabilities that exist under employment relationships are not applicable. This allows for a more flexible approach to how the two parties govern their professional relationship.
However, their distinction from traditional employment contracts can also have drawbacks. Consultants are not subject to the same degree of control companies have over their employees, such as implied duties of fidelity, confidentiality, and non-compete clauses. They are also required for taxation and auditing purposes. As a company, you are free to include such terms in the consultancy agreement you enter.
A non-comprehensive list of the most basic terms of a consultancy agreement is set out below.
Information of parties involved:
Names;
Contact information;
Address.
Scope of work;
Time frame and deadlines;
Confidentiality clauses;
Non-compete clauses;
Restrictive covenants;
Compensation;
Substitution clauses;
Termination terms;
Elaboration on independent contractor status;
If the state will govern any services rendered. If so, the scope of such services.
Conflict of interest terms;
Dispute resolution terms.
Not entering into a consultancy agreement bears the risk of creating ramifications for your business. Without one, the professional relationship you have entered becomes vulnerable to exploitation and carries the possibility of you losing your market edge, and being subject to legal liability.
Entering a consultancy agreement will ensure clarity between the parties regarding the deals that are to be made, and they reduce the possibility of misunderstandings between client and consultant that could lead to future possible liability on account of one of the parties. These agreements create professional frameworks for businesses to continue their operations whilst providing them with flexibility in dictating how they are to draft the consultancy agreements that will bind both clients and consultants. They bring great ease to clients and consultants as the agreement will entail how long their professional relationship will last and how and when the contract can be terminated.
Author: Yasmin Welsh -
Author: Yasmin Welsh -
In partnership with
DISCLAIMER
This article has been written by law students for the sole purpose of providing informative insight. The information in this article is intended for educational purposes only and does not constitute legal advice, nor should the information be used for the purpose of advising clients. You should seek independent legal advice before relying on any of the information provided in this article.
Sources
J Fuchs, ‘Consulting Agreements: What They Are & How They Work’ (HubSpot, 27 February 2023) <https://blog.hubspot.com/sales/consulting-agreement> accessed 10 April 2023
Employment Team, ‘What is a Consultancy Agreement?’ (Warner Goodman, 21 July 2021) <https://www.warnergoodman.co.uk/site/blog/news/what-is-a-consultancy-agreement> accessed 10 April 2023
Law Depot, ‘Consultancy Agreements’ (Law Depot) <https://www.lawdepot.co.uk/contracts/consulting-agreement/#.ZDPDbS8w2Rs> accessed 10 April 2023
