Keys of an Effective Consulting Agreement

Agreements are vital towards establishing a mutually beneficial relationship between two parties, laying out the services, terms, and conditions they consent to. A Consulting Agreement works no differently, providing a framework for consultants of all fields of expertise to provide their services to clients. Whether you offer such services or are in need of them, it is imperative you understand the key components of a successful Consulting Agreement and employ an attorney with expertise in drafting them.

Scope of Services

The core purpose of any agreement is to facilitate what one party will be doing for the other. A Consulting Agreement must have a section that, at minimum details, what sort of services will be provided by the consultant. It should reference an attachment to the agreement called the “Statement of Work” which sets forth a detailed and comprehensive description of the services that will be rendered, the fees and charges for those services, and any additional terms and conditions.

The same agreement may be used for multiple Statements of Work, and the services section may include a stipulation that the parties can change the scope of the services through a written “Change Order” signed by each of them. There should also be a clause requiring a status report to be reviewed and executed by both parties once services are complete.

Obligations

In some cases, the party employing the consultant may need to provide support services to facilitate the consultation work, such as the use of the company’s equipment. This part of the agreement establishes what these duties based on the understanding of the parties.

Fees and Expenses

While the service portion of the agreement lays out a general picture of the costs associated with the consulting work, the agreement should have a separate provision clearly delineating the recipient party’s responsibility to pay for those services set forth in the Statement of Work. It should include information about the pay period or when the invoice will be sent.

Timeframe

The Consulting Agreement should state what date it comes into effect and for how long it will remain in force. The agreement can be terminated on a specific date or when the work has been completed to the satisfaction of both parties.

Proprietary Rights and Confidentiality

Consulting services often require dealing with very sensitive material. The agreement should devote a section to clearly outlining the parameters and restrictions with which this information can be utilized, and state that one party consents to disclose said information to the other party. If anything confidential is to be disclosed to a third party, it can be done only through the written and signed consent of both parties. If a breach or wrongful use of this information is to occur, then the provision should spell out the consequences, namely an immediate termination of the agreement and the right of the wronged party to pursue legal action and recover the associated costs.

Warranty

This provision asserts that the consultant’s services adhere to acceptable industry standards and practices, and guarantees that any issues or shortcomings with the work will be remedied in some way (either through a refund or by resolving the matter at no additional cost).

General Terms

The Consulting Agreement should contain a section that covers a range of other matters that are crucial to the execution of the consulting work. This includes making clear that the consultant is an independent contractor rather than an employee (which would have distinct tax implications), giving leeway to any delays or failures in performance caused by externalities beyond either party’s control, and establishing how the two parties will communicate with one another in relation to the agreement (via email, U.S. mail, etc.).

In addition to these very broad characteristics, each Consulting Agreement is as distinct as the relationship they govern, and may, therefore, require additional articles and sections. It is crucial to enlist a legal expert that understands the careful language and elements that comprise an effective agreement.