Sample Format of Consultancy Agreement

Narendra Kumar

15 Jun, 2019

When one party employs any outside consultant for their expert views or services, and they execute an agreement to define this exchange of consultancy services for set consideration then such an agreement is termed as Consulting Agreement. This agreement outlines the rights and obligations of both the parties along with other terms and conditions of the contract. Here you can see and dowload also consultancy agreement format.

It is recommended to have a written duly executed consultancy agreement covering all the relevant clauses to avoid the risk of any disputes arising in the future.

Why enter into a Consultancy Agreement?

There are many projects for which expert knowledge is required. In such cases, it is recommended to hire a specialist to help with their expert services. This is preferable in cases when the requirement is temporary and the organization does not want to appoint a permanent employee for the task. In short, we can summarize the situations when the appointment of a consultant is preferable:

1. When the requirement is temporary in nature. When the requirement id event-based or for a set period of time, then it is recommended to hire a consultant for that set period of time or until the occurrence of that event.
2. Expert Opinion is required. As the consultant work in their specific field, they have in-depth knowledge due to the extensive research was done on their part. They have specialized knowledge and thus provide expert advice and perfect results for concerned problems or tasks referred to them.
3. Critical analysis is required. If in any case a critical and unbiased analysis of the business is required, then consultants are the perfect solutions. As they do not have any sentimental or working relationship with the company, they provide unbiased reports and analysis. Such independent opinion can be constructively critical for the organization.
4. Provides flexibility. The consultants are not permanent employees of the company. They can be appointed for a fixed period of time and their reappointment can be decided after analysis of their work. This provides the company the flexibility to choose the consultant best suited for their requirement.
5. It is also cost friendly. Appointing a consultant is also better than hiring a full-time employee is also cost saving. As no employment benefits are required to be paid.

What is the difference between an Employee and Consultant?

What are the Contents of Consultancy Agreement?

There are certain key components that must be kept in mind while drafting a consultancy agreement and included in the agreement to make it effective. Such components include:

• Details of Parties: Proper details of both the parties must be mentioned at the beginning of the Agreement. Such details will include name, full address etc. In case of corporate bodies, name, and address of its authorized representative.
• Effective Date: The date of execution of the contract must be mentioned. It will be the start date for the consultancy agreement. The time frame for the agreement will be computed from that date on.
• Define Consultancy Services: The agreement must define the consultancy services in question. Detail description of service along with the expectations of the hirer from the agreement and what are the desired results.
• Duration of Agreement: Consultancy agreements are done with preset expectations. The results are desired within a reasonable time period. It is required to mention the time period under the agreement. If the agreement is event based in nature then such event must also be explained.
• Payment Details: In order to avoid any future conflict it is recommended to mention in detail the payment obligations. This clause includes the following details:
  • If any fixed amount is to be paid weekly, monthly etc.
  • Information on any variable payment provisions per service provided or product delivered by the consultant.
  • If the consultant is entitled to reimbursement of any additional expenses or charges.
• Details of ownership of Intellectual Property: To avoid any claims in the future it is to be stated in the agreement itself as to who will be the owner of the work done, new products or inventions were done in the process of implementation of the contract.
• Confidentiality Clause: There should be a non-disclosure clause restricting the consultants from disclosing any confidential or strategically important information to any outside party.
• Restriction Clause: As we have discussed in confidentiality clause the consult has access to strategically important information. It is good to include the restriction clause also barring the consultant to use such information for solicitation or poaching of clients or dealers or partners.
• Details of Staff Requirement: The agreement should clearly mention if the consultant is authorized to appoint any staff substitute for the execution of work stated in the agreement. However, prior approval of the contractor.
• General Liability Clause: This clause will include the liability of both the parties specifically of the consultant under the agreement. These liabilities can include:
  • Timely results
  • Reimbursement in case of defective products or inconsistent services.
  • Under what circumstances claims can be made by either of the parties, etc.
• Termination provisions: The parties should identify the situations under which either of the party can terminate the stated consultancy contract. And this clause should also specify how the accounts will be settled between the parties.
• Signing: It is very important to make sure that the contract is duly signed by both of the parties or their representatives to make sure it is legally enforceable.