The use of a Consulting Agreement has been embraced by wide-reaching industries wishing to access the unique skills and expertise of self-employed individuals. Companies involved in healthcare, marketing, IT, and public relations, among others, sometimes need to outsource.
Onboarding an expert to solve problems and help move projects forward requires a detailed agreement. A consulting services agreement articulates all the crucial details and helps the business relationship progress.
What is a Consulting Agreement?
When properly executed, a consulting agreement forms a binding contract between a self-employed individual, the “consultant,” and an organization. The document provides essential information regarding the nature of the working relationship, desired results, compensation, and duration of the arrangement.
Because the consultant is typically self-employed, that person is sometimes called a “freelancer.” Consulting agreements are also known as:
- Business Consulting Agreement
- Consulting Services Agreement
- Independent Contractor Agreement
- Freelance Contract
These agreements usually come into play when a business needs support or expertise from outside its staff. The freelancer generally brings unique knowledge or a skill set that helps the enterprise achieve its goals.
When to Use a Consulting Agreement
If you are considering paying someone outside the organization to handle specific tasks or projects, it’s prudent to draw up a formal consulting agreement. Oral contracts and handshake agreements often result in the parties misunderstanding their duties or compensation.
Business professionals also use a consultant agreement template for accountability purposes. A legally binding contract ensures a third party delivers on a promise to complete specified tasks for set compensation.
A written document covering each stipulation and expectation helps avoid miscommunication.
What to Include in a Consulting Agreement?
It’s essential to cover the fundamental elements of the business relationship by inputting all the pertinent information. A well-crafted consulting agreement template will have areas to include the following.
- The Parties: The names of the people involved and their business entities must be included.
- Terms: The document should indicate whether the project involves a fixed period, remains open-ended, or is project-based.
- Compensation: It should outline whether payment is provided on a flat fee, hourly rate, per diem, or by percentages as the project moves forward, among others. Issues such as retainer fees and maximum compensation can also be included.
- Expenses: A well-thought-out consultant agreement details how expenses are handled.
- Services: It’s essential to detail the type of services that will be rendered and those outside the independent contractor’s responsibilities.
- Signatures: For a contract to be legally binding, both parties must sign and date it. If a notary is required, the parties must present their ID and sign before an official.
Clauses to Include in a Consulting Agreement
Several standard clauses guide as the business relationship progresses and after it has been concluded. Including the following in your consulting services agreement clarifies issues and provides lasting peace of mind.
- Confidentiality Clause: Also known as a “Do Not Disclose” or DND, this clause requires the consultant not to divulge trade secrets. It protects organizations from competitors’ learning processes and other items that give them an advantage.
- Non-Compete Clause: Consultants may work with valued clients and broker strong business ties. A non-compete prevents them from using that relationship to steal customers or bring them to a competitor. Some states place restrictions on non-compete clauses.
- Indemnification Clause: This clause protects the organization from any consequences arising from the consultant’s actions. However, liabilities that stem from the client’s negligence may not be covered.
- Termination Clause: A termination clause establishes when the project, duties, and compensation expire. It may also outline terms by which the client or consultant can end the working relationship.
- Intellectual Property Clause: Intellectual property (IP) remains a valuable asset, and ownership disputes frequently emerge from projects that fail to define these terms. Your consulting agreement can prevent disagreements by including an IP clause that addresses the issue.
Consulting Agreement Sample
Using a standardized consulting agreement template clarifies the duties and benefits of all parties. Our consultant agreement template serves as a reliable contract that prevents miscommunications. Download below in PDF or Word:
Frequently Asked Questions
The difference between a consultant and a contractor is that the former evaluates the client’s needs and leverages specialized knowledge to develop solutions. A contractor is a self-employed professional who performs work, usually at a fixed price.What is the difference between a consultant and a contractor?
A consulting retainer is an upfront fee paid to a third party to start a project. The retainer fee may cover all or part of the payment to the consultant.What is a consulting retainer?
Consulting agreements have proven beneficial across industries, particularly with relatively new business relationships. But even parties who have worked together for years still place value in these agreements. That’s largely because they protect the client and consultant while buoying project success.Why use a consulting agreement?