When working with a consultant or independent contractor, it is essential to create a well-written agreement that outlines expectations and obligations. Contracts or consulting agreements outline the names of the parties involved, how the contract will work, and how you both agree to the terms.
Without them, you have limited options for legal action if something goes wrong during or after the work is completed. A good consulting contract lays out all the terms and details of the project, and what happens if either party breaks it. Each consulting agreement is different, but it should all have certain key elements.
1. Scope of work
The scope of work element in an agreement on the exact services a consultant or independent contractor is going to perform during the assignment. It can also detail what the consultant is not expected to do for further clarity. It will be close to what was described in the RFP and will be adjusted based on conversations with the consultant.
The scope of work needs to be a detailed description of the deliverables, timelines, milestones, and reports that you expect the consultant to produce during the assignment.
2. Payment terms
In this section of the agreement, you’ll need to outline how and when the consultant will be paid so that there are no misunderstandings later.
Your payment schedule will depend on the assignment and with the agreement of the consultant. You could pay the consultant on a weekly or monthly basis, or you could agree on a set price that is paid based on milestones.
You should also include details of when compensation will be made for any project expenses incurred and paid in advance by the consultant during the duration of the agreement.
3. Confidentiality agreement
When working with a consultant, you may have to provide classified information, or they may have inadvertently learned some of your company’s trade secrets and other proprietary information. To secure confidentiality and protect your business, a confidentiality clause must be included in your consulting agreement.
Consulting agreements typically contain a confidentiality clause that outlines the legal penalties a consultant faces for disclosing confidential company information.
5. Intellectual property rights
This element details the ownership of the final work. As part of their work for you, the consultant may create project-related material (e.g. software, presentations, reports, etc.).
Be sure your contract stipulates that you will receive the rights for ‘intellectual properties’ upon completion of the assignment. That way, you’ll be able to use the intellectual property however you see fit and prevent the consultant from using the work for other companies without prior written consent.
6. Non-compete agreement
If you’re worried about the consultant working for your competitors after completing the assignment, you may want to include a non-compete agreement in the contract.
This agreement will legally bind the consultant from working with any of your competitors for a certain period (usually 1-2 years) after the assignment is completed.
Including this in your consulting agreement can give you peace of mind knowing that the consultant won’t be able to reveal confidential information they learned while working with you or during his or her services rendered.
7. Termination clause
No matter how detailed you are with your project plans, things don’t always go as smoothly as you imagined. You may have to make a strategic decision to terminate a project or the consulting services you receive may not be satisfactory. Or, the consultant may decide to stop working on the assignment for whatever reason.
The termination of services clause in your consulting agreement lays out the terms and conditions related to suspending or concluding work. Indicate whether the consulting services can be terminated immediately, or if an advance written notice to the other party is needed.
8. Limitation of liability
The clause protects you from any legal liability arising from the consultant’s actions. This indemnification element protects you from potential contract breaches or practices that could put your business’s operations or reputation in jeopardy.
This clause will prevent your company from being held liable for any damages or legal issues as a result of negligence on your consultant’s part. This includes their dealings with third parties that they may hire for the assignment.
9. Dispute resolution
It’s possible to have a dispute with the consultant at any point during the assignment, whether it’s your fault or theirs. Consider how you will address problems such as late payment for services, a breach of contract, arbitration, and mediation.
For example, if the consultant fails to deliver the work on time, they may be required to pay a penalty fee. Likewise, if you fail to pay the consultant according to the agreed-upon schedule, you may be liable for damages.
This clause is important to have in the contract so that both parties know what will happen if they fail to uphold their end of the agreement.
10. Signature and date
Don’t forget to include the signatures of both parties, and the date when the agreement is signed. It indicates that both parties agree to the terms and conditions of the agreement. Without the signatures and dateline, the entire agreement will not be considered lawful and will not be enforceable.
A consulting partnership is akin to a business partnership — you want to be as detailed and specific as possible when drafting your agreement. it’s important to ensure that the consultant agrees with the terms outlined in the document.
If you hire consultants at scale, then you may need a few agreement templates depending on the consultant services that you employ. You may want to check out the Onsiter VMS, which is a free-to-use vendor management system. The platform has free contract templates that you can customize and use when hiring independent contractors from the Onsiter marketplace.