The Basics of Consulting Agreements
You have invested in yourself and now you are an expert in your field. Individuals and companies come to you for that expertise so much so that you have started your own freelance or consulting business. You have dedicated yourself and your business to providing the best services possible. But if you don’t have a consulting agreement in place, you are doing a disservice to your clients and yourself.
What is a Consulting Agreement?
A consulting agreement is a contract that outlines the goals and expectations of the working relationship between you as the consultant and your client. This is a desirable document to have in place in the unlikely, but entirely possible, event that a dispute arises.
No two consulting agreements are the same, and the type of services that you offer will be one of the biggest factors in determining what a consulting agreement should include. Nevertheless, all consulting agreements should cover the following considerations:
Length of Relationship
Your consulting agreement should include a start and end date. The end date does not have to be a specific date, and instead can be an ongoing relationship that only ends if certain circumstances arise (which should be set forth in a Termination provision). Failing to include an end date or termination provision could require you to continue to provide services even though you may think you no longer need to.
Scope of Services
Your consulting agreement should include a description of the services that you will perform for your client. This provision is important to include so that your client knows exactly what services are included in your agreed-upon fee, and which services (if any) will not be performed. Particularly, if you perform any services on a flat fee basis, including a scope of services provision can help you avoid being “overworked” by a client. For example, you may want to limit your flat fee service to only provide a set number of revisions to a document (i.e. you will only perform two rounds of revisions to a business plan).
A scope of services provision will also include guidelines for how and when your work product will be delivered to your client. This is another way to set expectations for the working relationship so that your client does not expect a task completed in two days when it will take you at least a week to complete.
Payment Terms
Your consulting agreement should spell out the specifics of how you will be compensated for your services. Such payment terms should include:
How payment is calculated (i.e. your hourly rate times the number of hours you work for the client or a one-time flat fee);
When payment is due (i.e. is payment due once a month after your invoice is sent out? Is payment due up front before any work will begin? Do you offer flexible payment plan options?)
Whether client is responsible for reimbursement for any service-related expenses (i.e., travel expenses, mileage reimbursement, or mailing, postage, or copying fees);
Whether you will impose any late fees for overdue balances.
By clearly setting forth your payment terms, you are reducing the risk of your client being surprised by an invoice or expense request and refusing to pay or attempting to negotiate your fee.
Intellectual Property & Confidential Information
If you have trade secrets, copyrights, trademarks, or patents that protect any of the services and/or products that you provide to clients, it is imperative that your consulting agreement sets forth that you are and will remain the sole owner of such intellectual property.
Similarly, if you or your client may have access to intellectual property or other confidential information belonging to the other, your consulting agreement should include limitations on how that confidential information can be used in the working relationship (i.e., confidential information cannot be disclosed to any third party; confidential information should be destroyed after the consulting relationship comes to an end).
Termination
Your consulting agreement should include clearly defined methods of ending the contract. The most unrestricted and balanced way to draft a termination provision is to allow either party to terminate the working relationship at any time for any reason. A more restrictive termination provision will only allow a party to terminate the agreement if a certain event happens (i.e. if the other party breaches the contract, fails to pay outstanding balances, or if you fail to meet a certain deadline) or if a certain amount of notice is given first (i.e. 30 days).
Your termination provision should also include language that entitles you to payment for all time that you exerted on the matter prior to the agreement being terminated. For example, if you perform 80% of the services contemplated in the agreement and the client suddenly ends the contract, you will want a provision that requires the client to compensate you for the time that you already spent on the project.
Dispute Resolution
Although a consulting agreement is designed to reduce the risk of a dispute arising, sometimes disputes cannot be avoided. Your consulting agreement should include terms of how a dispute arising between you and your client should be handled. You can agree to handle the dispute in arbitration rather than going to court. You can also agree to pre-select which state, county, or city in which a lawsuit may be filed.
Protect Your Business with a Consulting Agreement
You have worked tirelessly to build your expertise and your freelance or consulting business. Why leave your future up to chance when you can instead invest in a consulting agreement to clearly set expectations with your clients, reduce the risk of disputes arising, and protect yourself and your business in the event a dispute occurs. Schedule a Free Consultation with business attorney Kayla M. Brennan to get started on your customized consulting agreement.