Consulting Retainer Agreement

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Consulting Retainer Agreement

Brief Introduction About Consulting Retainer Agreement

A retainer model is one where a client engages the services of a professional for a particular time and pay them a monthly fee for their services. This fee is called a retainer as it is used to retain the professional with the client. This model is popular in the legal sector. It is also used by clients who hire consultants for their business. In this case, the arrangement is governed by a consulting retainer agreement.

It is a legally binding contract between the client and the consultant. It includes terms highlighting what work the consultant will perform, how much time she will devote to it, the retainer fee that the client will pay and the respective duties of the parties.

Purpose of a Consulting Retainer Agreement

A Consulting Retainer Agreement has many purposes. It allows the parties to clearly lay down their expectations from each other. This reduces the scope for misunderstandings. They are able to work smoothly according to the terms of the contract. The consultant gets a stable income every month. This way, she can manage her budget and work-schedule well.

This stability helps her to focus on the work and deliver more value to the client. The agreement also secures the services of the consultant for the client for a fixed time. The client does not have to worry about finding another professional for the work. The agreement protects the interest of both parties.

Contents of a Consulting Retainer Agreement Template

A Consulting Retainer Agreement Template will have the following key terms:

  • Name of the consultant and the client
  • Effective date of the agreement
  • Term of the agreement
  • Scope of work
  • Performance of services
  • Retainer fee
  • Reimbursement for additional expenses
  • Client’s obligations
  • Termination of the agreement
  • Relationship of the parties
  • Confidentiality
  • Disclaimers
  • Dispute settlement
  • Applicable law
  • Signature of the parties

The parties can include other terms that are specific to their case. But these must comply with all applicable laws and regulations.

How to Draft a Consulting Retainer Agreement

The drafting process should be conducted with the following points in mind:

  • Each term of the contract must be clear and unambiguous. There should be no doubt about its meaning.
  • Term: It should clearly mention the duration of the agreement. It can be for a few months or even extend to a year. Whatever the duration, it should be precisely stated.
  • Scope of work: This clause should explain in detail what services the consultant will offer. It will contain the work that she has to do and everything included therein. It may also state some additional but related work that she may have to perform. 
  • Performance of services: It must state the specific number of hours that the consultant will work to complete her obligations. These are usually decided by the consultant. 
  • Retainer fee: It should clearly mention the retainer fee to be paid by the client. It is generally paid monthly. If the parties have decided on a different arrangement, that must be clearly explained. The term should mention when and how the fee is to be paid. 
  • Parties’ relationship: It must state that there is no employer-employee relationship between the parties. Hence, the consultant will not be entitled to any employee benefits.
  • It is important to include a confidentiality clause because the parties will be exchanging a lot of information. This will protect the information from being leaked to outsiders.
  • Disclaimers: This should state that the consultant is not an attorney or a tax professional. Any advice given by her should be treated as an opinion. This will protect her from unfair liability. 

Negotiation Strategy

As a consultant, you can refer to a sample retainer agreement for consulting services to understand its terms. You should take into account your place of residence when deciding your fee. If you are based in a high-income area, such as an urban area, you can set a high fee based on the market. If you plan to offer a discounted rate to your retainer client, ensure that it is not too low. It may prove difficult for you to raise your fees later.

You should consider the number of hours and then decide the corresponding amount of fees. If you are a client, you can negotiate the number of hours required for your work so that you do not have to pay a retainer fee for unused hours.

[ Also Read: Consulting Agreement ]

Benefits and Drawbacks of a Consulting Retainer Agreement

Benefits

  • It gives the consultant a stable income every month.
  • The client can get a discount from the consultant on the retainer fees.
  • It can lead to a long professional relationship between both parties.

Drawbacks:

  • The consultant will have to strictly meet the deadlines set by the client. This does not allow for much flexibility.
  • If the work is completed in less than the number of specified hours, the client cannot carry the remaining hours over to the next month.

What Happens If It Is Violated?

If a party violates a retainer fee consulting agreement, it will constitute a breach of contract. The dispute settlement clause will be invoked and the process mentioned therein will be followed. It may mention negotiation, mediation(1) or arbitration as the method of resolving the issue. It may also state that parties can file a suit in case of a violation. In this case, the law of the state mentioned in the ‘applicable law’ clause will apply.

A consulting retainer agreement is an important document between the client and the consultant. It is a tool that helps them develop a strong professional relationship. Since all the terms of the arrangement are put in writing, it minimizes disputes and helps the parties to function efficiently. It is not a complex document to draft. But it is advisable to get it reviewed from an attorney or use a template that is prepared by attorneys.