Consulting Contracts: Everything You Need to Know
Consulting agreements are essentially written contracts that detail services a consultant provides. 3 min read
2. What Should Consulting Agreements Contain?
3. Why Use a Consulting Contract?
4. What to Know About Drafting a Consulting Contract
5. Executing the Consulting Agreement
Updated November 24, 2020:
Consulting agreements are essentially written contracts that detail the services a consultant provides. Consultants are independent contractors or freelancers. They typically have multiple clients rather than working as an employee for one company. Consultants are in demand because they are typically specialized in one industry, such as engineering, social media, or accident reconstruction.
Consultants need contracts to provide some legal support should the client not pay them. Also, clients need contracts to have some assurance they are getting the services they've agreed to and are paying for.
Basics of Consulting Contracts
Consulting Agreements go by several names, including Consulting Contract, Freelance Agreement, Business Consulting Agreement, or Independent Contractor Agreement. The contract describes all the terms related to the consulting business to make sure the client receives services while the consultant can ensure he or she gets paid.
A consulting agreement contains important information, including a detailed description of the services to be provided and the duration of the agreement. It will talk about compensation. Important topics like confidentiality, noncomplete clauses, and nonsolicitation are addressed through provisions in a consulting agreement. The agreement can set forth product ownership rights and who is responsible for obtaining materials.
What Should Consulting Agreements Contain?
A basic consulting agreement template contains similar information:
- Contract duration
- Services provided
- Work product and intellectual property
- Indemnification clauses
- Applicable law
Consulting agreements should also have other sections:
It's a good idea to look into other documents in conjunction with the use of a consultant agreement:
- Nondisclosure Agreement or NDA
- Employment Contract
- Employee Handbook
- Independent Contractor Agreement
Why Use a Consulting Contract?
One of the main reasons consultants use a consulting contract is to ensure they are paid for services rendered. Customers, or clients, often choose to use a consulting agreement when retaining an independent contractor to protect proprietary information through nondisclosure clauses.
What to Know About Drafting a Consulting Contract
Consulting Contracts are legally binding like any other contract. This is why it's important to consider using one if you are working as a consultant to clients. To enter into a valid consulting agreement, you need to meet the legal requirements:
- First, you have to have legal capacity to enter into a contract.
- You must verify the agreement matches up to local and federal laws. A consulting contract won't stand up in court if it violates local state law.
- Start by writing the initial section of your contract that includes pertinent information like the title of the agreement, who the parties are, and contact information for everyone.
- Next, you will detail what each party is bringing to the table. This can be detailed or as simple as "X is providing services and consulting and B is providing payment for the consulting work."
- You will need to define the consulting services you're providing. Go into detail about what each consultant does under the contract. Decide how consultants will be paid and specify this in your agreement. Maybe you opt for periodic payments or a lump sum in some instances. Whatever the procedure is, just make sure it's clearly spelled out.
- Determine whether the consultant will remain an independent contractor or an employee. This is a very important detail because it determines how the consultant is treated. Most of the time, consultants are independent contractors. Therefore, they are not eligible for benefits like vacation time or sick leave.
- Decide how long the agreement will be valid. Specifically, state when consulting services begin and when they end.
- Be sure to include a termination clause. This gives information on what to do if the contract needs to be terminated early. Include details on how an early termination affects compensation.
- Check for miscellaneous provisions that may apply to your situation. Some popular ones include modification provisions, indemnification, choice of law, and severability.
- Don't forget to have a separate section for signatures required of all parties.
Executing the Consulting Agreement
Once your contract is completed, you'll want to offer it to the other party. They have the option of accepting it in full, rejecting the contract entirely, or trying to negotiate some of the terms. Payment is one of the main areas where people find negotiations take place during this phase.
Once you've reached an agreement, sign the contract and verify both sides are in complete agreement before starting to provide the consulting services offered in the first place.
If you need help with consulting contracts, you can post your legal need on UpCounsel's marketplace. UpCounsel only accepts the top 5 percent of lawyers to its site. Lawyers on UpCounsel come from law schools such as Harvard Law and Yale Law and average 14 years of legal experience, including work with or on behalf of companies like Google, Menlo Ventures, and Airbnb.