Last Updated September 11, 2024
What is a Consulting Agreement?
A Consulting Agreement outlines the terms and conditions of professional services a specialist (i.e., consultant) provides a client. It’s commonly used when a client hires a freelancing consultant or consulting business to perform specialty work or provide industry-specific guidance.
- A Consulting Agreement is also known as a:
- Consultant Services Agreement
- Consultancy contract
- Freelance contract
Why should I use a Consulting Agreement?
Using a Consulting Agreement benefits consultants and clients. It protects each party from liability for the negligent acts of the other party, reduces the chances of a conflict, and holds both parties accountable for their contractual responsibilities. If there’s a future dispute, a contract provides evidence of what both parties agreed upon.
Consulting freelancers and businesses can create contracts when taking on new clients. Or, clients can draft a contract if a consultant doesn’t initiate the use of one.
Specialists in many industries can benefit from Consulting Agreements. This includes, but is not limited to:
- Computer services and software
- Software as a service (SaaS)
- Information technology (IT)
- Architecture and construction
- Accounting and finance
- Legal services
- Engineering
- Real estate
- Healthcare
An agreement can also be essential for taxation and auditing purposes. Businesses must keep records of all expenses and income, including service or employment agreements, on file.
Please note that a consultant is considered an independent contractor, not an employee. Anyone looking to hire an employee will need an Employment Contract, which they can create using LawDepot’s customisable template.
What to include in a Consulting Agreement
LawDepot’s Consulting Agreement template is customised for your country. It prompts you to include all the essential details for a valid contract, including the following:
Services
Consultants can provide a range of services, depending on their specialty. An agreement must specify what the consultant will do for the client and include any deliverables or deadlines that may be involved with their work. For example, a consultant may be hired to provide any of the following specialty-specific services:
| Consulting specialty |
Service examples |
| Management |
- Strategy development
- Organisational restructuring
- Performance practice and improvements
|
| Finance |
- Planning and analysis
- Risk management and investments
- Crisis management and recovery
- Tax compliance and return assistance
|
| Human resources |
- Talent acquisition and management training
- Employee training and policy development
- Remuneration, payroll solutions, and benefits
|
| Marketing |
- Market research and analysis
- Brand strategy and development
- Digital marketing strategizing
- Search engine optimisation (SEO), pay-per-click (PPC) guidance, and analytics
|
| Information Technology (IT) |
- Strategy development
- Cybersecurity and risk management
- Software development and emerging technology
|
Providing concise service details will help hold a consultant accountable for their work and provide evidence if any disputes about their service occur in the future.
Payment details
Outlining the negotiated rates for a consultant is a typical starting point and is crucial in an agreement. These details hold clients accountable for providing the correct compensation at the right time. Details include:
- Fees (e.g., flat fee or hourly rates)
- Applicable taxes
- A retainer
- Time or frequency of invoicing and payments
- Contractual interest
An agreement can also include any work expenses the client will reimburse to the consultant.
It’s important to note that any late fees must be at a reasonable rate. Contractual interest rates of up to 25% per year on unpaid sums may be enforceable. Legislation and case law prohibit extortionate interest rates, even if the parties agree to them. If an interest rate is unreasonable, the court will not enforce it.
Timelines and termination clauses
The term of a Consulting Agreement can be defined in a number of different ways. The term can be for:
- A single project - until the job is done
- A fixed period of time with start and end dates
- An indefinite period for ongoing services
If both parties agree to a termination clause, it must be included in the agreement. This clause outlines how much notice must be provided to terminate the contract.
Notice periods allow a party to exit the agreement without breaching the contract. In addition, a notice period allows the other party to resolve any issues that may have caused the terminating party to take these steps.
If the service contract does not adequately provide for termination, this can be remedied using a Termination Agreement.
Confidentiality clause
Consultants may need access to clients' confidential details to better fulfill their services. For example, if an accountant (i.e., the consultant) is providing advice for a new business, they will need to see the client’s business plan to provide the right information to meet their goals or give them guidance on how to better adjust their plans for financial success.
A confidentiality clause is essential for a Consulting Agreement so a consultant can receive information that is considered a trade secret or existing intellectual property (IP). This clause creates terms for using private information and gives clients peace of mind their details are secure.
Intellectual property ownership
A Consulting Agreement can determine who owns the rights to any intellectual property created during the contracted period based on the negotiations between the parties. This can include any generated plans, creative works, and materials a consultant develops for the client.
A contract can outline either of the following options:
- The client receives complete ownership of all the materials produced
- The consultant retains all ownership of the materials generated
Whichever party doesn’t retain the rights to the intellectual property will only have limited use and access to these materials in the future.
For more information about intellectual property, consult the Intellectual Property Office.
Additional clauses
Consulting Agreements can include additional clauses that are applicable to the services being provided.
LawDepot’s Consulting Agreement allows you to include additional clauses that may apply to your agreement.
How is a consultant different from an employee?
When a client hires a consultant, they’re not hiring an employee. An employee works at the direction of the employer who provides working hours, methods, and tools for the employee to fulfill their role. Employees typically only work for their employer and carry out their work themselves.
On the other hand, a consultant works as a freelancer or independent contractor and is not on the client’s payroll. Their work is autonomous and during the hours the consultants set themselves. Typically, a consultant will have more than one client and can hire subcontractors to carry out their contractual obligations.
In LawDepot’s Consulting Agreement, the following clauses outline the contractor status of the consultant:
- A right of substitution that allows the consultant to hire a subcontractor to meet the obligations of their services.
- Autonomy for the consultant who has full control over working time, methods, and decision-making
- Equipment the consultant will provide, such as tools, materials, and supplies
- No exclusivity for consultants as they do not work exclusively for the client and may seek out opportunities with other clients
- An indemnity clause that protects both parties from liability under applicable jurisdiction laws
- A return of property clause that requires the consultant to return any of the client’s property, documents, records, etc., at the end of the contract
Do I need a witness when signing a Consulting Agreement?
Though it isn’t a legal requirement, a witness can validate signatures if there are any future disputes or misunderstandings about the agreement.
If questions regarding the agreement’s validity arise, a witness can back up that no forgery, coercion, or undue influence was involved while signing.
