Things to be included in a consultancy agreement
By Lawfarm Team December 29, 2021
By Mihika Awate
When an individual or a company embarks on the path of business, there are various components from different fields that they need to look into to successfully start and maintain the business. A person may be a jack of all trades, but sometimes one needs an ace of trade to work out the intricate details and advise them on the same. These aces or experts are known as consultants. They consult you on the said matters and help you work out a particular component that you have little to no background in. Such consultants are often hired by clients on the basis of their needs, and it is always advisable to put the terms and conditions of their agreement into a written format to clarify the details of this arrangement as well as to prevent any confusion or misunderstanding.
Although the clauses to be included in a consultancy agreement would vary depending on the service being provided and the needs of the client, there are certain general terms that need to be included in such agreements.
1. Details of the parties and recitals
• The identification of both the parties needs to be done at the very beginning of the contract to lay down who the parties involved are i.e who is the consultant and who is the client. The recitals, which simple lay down the history behind the agreement and its context, should follow the identification clause.
2. Scope of service(s)
• A consultant may be providing multiple services and the client may need to avail some of the services only and this is where the scope of services comes in. This is the heart of the agreement and hence needs to be paid the most attention to. Clauses related to the scope of services lay down what are the services being provided by the consultant to the client, what are the matters the consultant would be advising the client on, et cetera. One may also include the list of services that a consultant will not provide to the client for further clarity.
3. Things needed by the consultant from the client
• The consultant would need certain documents and other material from the client to carry out their work as laid down under the scope of services. A clause laying down the list of things the consultant would need from the client may also be included in the agreement. A clause to the effect of asking the client to cooperate with the consultant regarding such matters may also be included in the agreement.
4. Duration or term
• This clause simply lays down the start and the end date of the agreement i.e from when and till when will the consultant be providing the client with the services as laid down under the scope of services clauses. It also acts as a deadline for the parties to efficiently finish the work within the stipulated timeline.
• While working for the client, the consultant may gain access to confidential information of the client. It is in the client’s best interest that such information may not be exposed to anyone else for it may cause harm to the client’s reputation or business, et cetera. Hence it is always advisable to include a confidentiality clause to protect sensitive information and prevent the consultant from revealing it to any third party.
6. Intellectual Property
• Clauses related to intellectual property mainly talk about who would have the rights to the works produced as a result of the agreement. It is usually the client who gets the rights to the intellectual property that is produced by the consultant as a result of the agreement, this needs to be specified in the agreement. There may also be certain exceptions where the client may allow the consultant to retain the rights of the work produced by them. All these details need to be included in the clauses relating to intellectual property.
7. Payment for services rendered
• What would be the payment the consultant will receive for the services rendered by them, when would they receive it, what would be the mode of the payment are the details which would be included in this clause. The amount of payment is decided by the parties after discussion and negotiation.
8. Indemnity, Liability and Dispute resolution
• A clause regarding indemnity which states the responsibility of each party towards the other is usually included as well.
• The Liability clause lays down the situations in which liability for each party will arise and the extent of the same.
• The dispute resolution clause lays down the method the parties would resort to if a dispute arises between them, whether it would be litigation or mediation or arbitration, et cetera. If the parties wish to resort to arbitration, then having a clause to that effect is important sincere matter can only be referred to arbitration if an arbitration agreement exists between the parties.
9. Amendment clause and signature of the parties
• There may arise a situation where amendments may need to be made to the agreement. In such situations how the amendments would be made needs to be specifically laid down in the agreement. If no amendments can be made, then that should be included as well.
• The agreement should conclude with the signature of the parties.
Other clauses such as non-compete clause, non-solicitation clause, deadlines for the given work, et cetera are also included in such agreements. It is important to lay down the specifics of the agreement and have a detailed agreement. The clauses mentioned above are general and should be included in all consultancy agreements. Hiring consultants is needed to run a successful business, but it is important to do so with utmost care. A properly drafted consultancy agreement can prevent any issue which may arise between the parties and ensure that the work for which the parties have come together takes place properly and smoothly. Therefore, always enter into a consultancy agreement for it is in the best interest of both, the client as well as the consultant.
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