When a consultant is called to provide services to an individual or a business organisation, he or she will create a consultancy agreement, which defines the terms of service between the consultant and the client. The agreement helps both parties to protect their interests and ensure the agreement is followed by clarifying all the agreed-upon demands.
1. Define Duties, Deliverables, and Roles
Consultations contracts should clearly outline the services and products to be delivered. When reviewing a contract, don’t assume anything. If terms are unclear, deadlines are ambiguous, or deliverable descriptions are vague, provide details.
In the consultancy service agreement, you should clearly state that the client engaged you as an independent contractor and that your tax obligations are your sole responsibility. You are the boss of your own business as a contractor. This means that you can choose when, where, and how you provide your services.
Be sure to outline any client delivery obligations in the consulting contract. For example, if the client is required to provide background materials, schedule meetings, or review reports, make sure these obligations are outlined in the outline.
2. Prepare for Potential Risk
Indemnification clauses are powerful tools for managing the potential risks between you and your client. If possible, you can request mutual indemnification, under which both parties are responsible for each other’s harm, liability, or loss.
In the event that someone sues you for violating intellectual property laws, you may promise to compensate them. Conversely, if you are sued for something they did, the client may promise to compensate you. In this way, both of you take responsibility for your actions.
3. Specify Project Milestones and Engagement Time
You and your client will be able to stay on schedule if you outline when project components should be delivered. You will also be able to revise milestone dates before the project begins.
You may also want to define your engagement term. For example, you may decide to do the project once, or to run the project for a set number of weeks or months. If the client or you do not adhere to the contract terms, include a mutual termination clause that allows you to cancel the contract.
4. Identify Expenses and Outline Payment Terms
Make sure to include additional expenses in the consulting contract if you anticipate additional costs. By identifying expenses beforehand, you can protect yourself and your client against surprises later on.
Additionally, include payment terms such as invoicing, billing, and time-keeping policies. Making sure you spell out clear timeframes for payment as well as when you are allowed to invoice will be a helpful indicator that the payment will be received timely.
In consulting contracts, guard against discounting and allowances. The client might, for instance, take a percentage off the bill for paying you early. When this happens, it’s in your best interest to ask your client to remove the provision.
5. Specify Product Ownership
In your capacity as an independent contractor, you must understand your intellectual property rights. Keep in mind that many clients may have non-compete clauses that prevent you from starting new work if it is in any way competitive.
You can get around non-compete clauses by explaining to the client that they would prohibit you from working until after the contract ends. Make sure that any additional agreements have time limits so that they don’t violate the client’s intellectual property, trade secrets, or proprietary information. If necessary, include a non-disclosure or non-solicitation clause.
6. Beware of Warranty Clauses
When a warranty clause is included in a contract, it guarantees the client that certain facts or conditions are true and will happen. These sections often include re-performance clauses or refunds, so try to remove them as much as possible.
It may be reasonable for you to include a warranty if it is within your own resources and control and if it does not limit your obligations. For instance, a software developer may guarantee that the product will be defect free for six months following delivery.
It is important for you to find a mutually beneficial relationship with the client through a consulting contract, so that you are both protected. It is important to negotiate the right contract from the beginning in order to ensure a successful working relationship. It is important to suggest changes and work with your client to find a solution that works for both of you.