A Brief Introduction of Consulting Agreement
A consulting agreement is an agreement created for the provision of consulting services. The term “consulting services” includes a range of services such as the implementation of a project, the provision of certain guidance, management of personnel, etc. A company that wishes to hire a consultant for these services must enter into a consulting agreement. This agreement may also be known as a “consulting services agreement.”
This agreement covers all the details that are important to the entire matter at hand. It is an important agreement that provides proof of the entire transaction.
Who Takes the Consulting Agreement? – People Involved
A consulting agreement is entered into between the person who will be providing consultancy services (known as the consultant) and the company that wishes to hire the services of the consultant for the provision of certain services (known as the client).
Purpose of the Consulting Agreement – Why Do You Need It?
The purpose of a consulting agreement is to lay down in writing the terms and conditions under which the consultant has been hired to provide certain consultancy services. The agreement is necessary as it is important to have all the important terms written down in detail so as to prevent any confusion in the future and to avoid any conflict. When such an agreement is in place, it helps the parties have a complete understanding of the entire transaction and leaves no room for any error or misunderstanding. All the particulars such as the scope of the consulting services, the mode of payment to the consultant, and other important details will be a part of the agreement, and this provides confirmation of all the specifics.
The purpose of the agreement is to support the rights and interests of the parties in case one party violates the clauses of the contract. This agreement helps to have written proof of the specific details agreed to by the parties. Additionally, the contract will also provide for remedies to make sure that each party can protect their rights under this agreement. The various acts that can be deemed to be a breach of the agreed terms will be listed out, and a remedy will be provided for each one of them.
Contents of the Consulting Agreement
Below are the key terms of a consulting agreement:
- Term of the agreement: The time period for which the agreement shall be active must be mentioned clearly.
- Services to be given by the consultant: The clause must give a detailed list of services that the consultant will perform for the client.
- Compensation: This is a very important clause and must lay down the compensation that will be payable to the consultant and the mode through which such payment shall be made.
- Intellectual property in work product: This clause should specify which party has the IP rights over the work product that is created by the consultant as part of this agreement.
- Confidentiality: Confidentiality clause is necessary to make sure that the consultant does not disclose or misuse the confidential information of the client.
- Non compete clause: This clause states that during the term of the agreement, the consultant shall not engage with or perform consulting services for any company that is in competition with the client.
- Nonsolicitation of customers: This clause is important to make sure that the consultant does not solicit customers of the client during the term of the agreement and for a certain period after the termination of the agreement.
- Dispute resolution: The agreement must provide for an effective dispute resolution mechanism to resolve any dispute that arises under the clauses of this agreement.
- Indemnification: Under this clause, the client agrees to indemnify the consultant against any lawsuit pertaining to the business of the client.
- Modification of the agreement: This clause details the process through which the agreement may be modified by the parties.
- Termination of the agreement: Termination of the agreement clause will lay out the circumstances under which the agreement may be terminated by either of the parties or by both parties mutually.
How to Draft the Consulting Agreement?
Ensuing are the steps to follow while drafting a consulting agreement:
- The client and the consultant must decide all the important terms and conditions regarding the consulting services such as the scope of the services that the consultant will perform, the terms of the payment, acts that will amount to a breach of the clauses of the agreement, remedies in case of a breach of the contract by the other party, etc.
- All the decided terms must be laid down in the agreement itself, and there must be no room for any doubt regarding the intentions of the parties.
- The agreement must be thoroughly reviewed by both parties to ensure that their rights and interests are adequately protected under the agreement.
- The contract should be registered by both parties. This will ensure that the agreement is binding in nature.
- The basic negotiation strategy is to ensure that the agreement is unbiased to the parties and that their interests are protected.
- It must be settled such that the agreement is fair and balanced and benefits both parties while providing for adequate remedies for both parties.
Benefits and Drawbacks of the Consulting Agreement
The benefits and drawbacks of having a consulting contract:
- Having a written agreement in place helps both parties to reach a consensus on the various specific details that are involved in the subcontracting of the tasks by the contractor and avoids any confusion or misunderstanding in the matter.
- This agreement helps to protect the contractor from any act of the consulting that is negligent or an act that amounts to a breach of the clauses of the agreement. The contractor will not be held liable for any misconduct on the part of the consulting.
- In the absence of such a written agreement, there will be no solid proof of the various specifics of the transaction, such as whether a certain action performed by the consulting falls within the ambit of the agreement or whether the contractor has defaulted on making a payment to the consulting. In such cases, it will be difficult to prove that a breach of the agreement has taken place and that the rights of a party under the agreement have been violated.
- If such an agreement is not in place, both parties may have limited or no remedies available in case there is a breach of the clauses of the agreement by the opposite party. The agreement will have a dispute resolution in place, and this will help the parties reach a solution if a dispute arises with respect to the terms of the agreement.
What Happens in Case of Violation?
Generally, consulting agreements have a clause that includes the actions to be taken when a party breaches the clauses of the said agreement. Every agreement must have a detailed list of what acts or what omissions will amount to a breach of the agreement.
A mandatory arbitration clause is present in many consulting agreements and states that if a clause of the agreement is disobeyed or if any dispute rases with respect to the terms of the agreement, the matter will be resolved by arbitration. The clause mentions where the arbitration proceedings will take place, i.e., the seat of arbitration, the language in which the proceedings shall be conducted, and the manner in which the arbitrators shall be appointed.
Alternatively, any other form of dispute resolution, such as mediation or negotiation, may also be mentioned in the agreement.
The agreement may also mention that any disputes arising under this agreement will be subject to the exclusive jurisdiction of a specified court.
In conclusion, a consulting contract is an essential agreement when a company hires an outside consultant to provide certain services that the company may not be able to handle effectively on its own. When such a consultant is hired, it is imperative to create a consulting services agreement to give effect to the terms agreed to by the parties. If such an agreement is not entered into by the parties, there will be no proof that such an arrangement was created by the parties. Also, there might be a conflict with regard to which party will have copyright over the work product created by the consultant. To avoid any such dispute, it is better to draft an agreement that clarifies these issues and protects the rights of both parties.
Sample Consulting Agreement
A sample of the Consulting Agreement can be downloaded from below.
Download this USA Attorney made Original Agreement for only $9.99
This agreement is made between the Company and Consultant on the effective date of 18th November 2011.
Company represented by
Mr. Nick Mason
Address: 104 Navarre Street, Boston MA 02136
Contact number: (617) 910-3202
Consultant represented by:
Ms. Jennifer Nicholson
Address: 1279 Hyde Park Ave., Boston, MA 02136
Contact number: (617) 361-7400
Term of Contract: 2 years
Terms and Conditions:
- This Consulting Agreement is being drafted on the basis of the fact that the said “Consultant” possesses knowledge of the organization’s business and will be able to provide meaningful assistance and direction that will eventually benefit the company “Remington Associates” on the whole.
- The “Company” desires to hire the esteemed services of the “Consultant,” and the “Consultant” is willing to offer the required services as mentioned in Section 9 of this Consulting Agreement based on the various terms and conditions set hereunder.
- Subject to the terms and conditions of this Consulting Agreement, the consultant’s term begins on 20 November 2011, known herewith as the “Commencement Date” and will expire on 21 November 2013, known herewith as the “Expiration Date.” Until and unless the service of the Consultant is terminated sooner, the Consultant will serve “Remington Associates” till the end of the term.
- The Consultant based on terms and conditions mentioned in this Consulting Agreement will not offer his or her services to any other company, including competitors and those in the same or similar line of business as “Remington Associates.”
IN WITNESS WHEREOF, the parties “Company” and “Consultant” have executed this Consulting Agreement as on the date set forth, which is 11/18/2011 (MM/DD/YY).
SIGNED FOR AND ON BEHALF OF COMPANY BY:
SIGNED FOR AND ON BEHALF OF CONSULTANT BY: