What Is a Consulting Services Agreement?
A consulting services agreement is a contract defining the terms of service between a client and a consultant.3 min read
2. What Is Included in a Consulting Services Agreement?
3. Do's and Don'ts
Updated November 9, 2020:
A consulting services agreement is a contract defining the terms of service between a client and a consultant. The document can also be referred to as a consulting contract, a business consulting agreement, an independent contractor agreement, or a freelance agreement.
When Should You Use a Consulting Services Agreement?
A consultant, contractor, or freelancer is an individual or business that provides advice or services to a client. Consultants typically specialize in a certain area, such as human resources, marketing, web content, etc.
As a consultant, you may want to use a consulting services agreement before providing any services to another business or individual. As a customer, you should also use an agreement when hiring a consultant to perform services for your business.
Consultants use these agreements to protect their interests and ensure they are properly compensated after completing the services outlined in the agreement. Customers use consulting services agreements to protect the company's information via nondisclosure clauses. Either way, a consulting services agreement is in every party's best interests.
What Is Included in a Consulting Services Agreement?
Every consulting services agreement should start with the names and contact information for the customer and service provider. After that, the agreement should include:
- Provided services: Clearly describes the nature of the services provided, including the duration of the contract.
- Compensation: Includes terms regarding when and how much the customer pays the contractor in exchange for services.
- Confidentiality Clauses: Contains confidential provisions such as noncompetition and nondisclosure agreements, which prevent consultants from giving away trade secrets, marketing information, client lists, and other valuable information to the public or competitors.
- Materials: Addresses ownership rights to the service or product supplied by the consultant, which will either remain with the consultant or transfer to the customer upon competition.
Do's and Don'ts
The consulting services agreement is designed to protect both parties' rights for the duration of the contract term. However, if the agreement does not describe which tasks must be completed or the rates associated with individual projects, those specifics must be drafted in a separate document.
Before completing or signing a consulting services agreement, decide what your goals are. At a minimum, the agreement should describe the consultant's goals or tasks, payment terms, the amount to be paid, deadlines, and end-product expectations. You should clarify these conditions before finalizing the agreement.
Never sign the consulting services agreement without having a chance to review it in detail. Give each party plenty of time to read the agreement and ask questions. Doing so will reduce the chance of a party claiming they didn't understand certain terms.
If you feel the agreement isn't in both parties' best interests, or you feel it is too restrictive or imbalanced, renegotiate the terms. It's best to revise or restructure the agreement before entering into the contract, so you don't encounter trouble down the road.
Remember: It's better to include too much in the agreement than not enough. Never assume certain terms or expectations are agreed to unless they're explicitly stated in the contract.
The written agreement is just the first step in establishing a contractor's status. Both parties must uphold their ends of the bargain to ensure the status is maintained throughout the project.
You may want to review your state's laws regarding independent contractors. Some states make it harder for contractors to qualify, so you may need to adjust the agreement to fit the state's rules and regulations.
When you've finalized the consulting services agreement, sign two copies, one for you and one for the other party. Be sure to keep the copy in your business records so you can revisit the agreement's provisions at the end of the term. At this point, you can decide whether to renew the agreement or not.
You can choose to have the agreement notarized and witnessed to give it more validity. It's a binding contract regardless, but having the agreement notarized limits any challenges to the validity of your signatures. It's also a smart idea to have an attorney help you draft the document. Even if your lawyer doesn't help construct the agreement, you can still have them review it before either party signs it.
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