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What is a Consultancy Agreement?

A Consultancy Agreement or Consulting Contract is a contract by which a company engages a consultant to provide services as an independent contractor. It includes all the specifics for hiring the contractor and the obligations, payments, and others.

A person engaged under a Consultancy Agreement is not an employee and does not enjoy statutory rights as an employee.

Under a Consultancy Agreement, a consultant is bound to provide their expertise or knowledge by understanding the client’s requirements and finishing the project by the deadline.

What is the difference between a Consultant and a Contractor?

A consultant is a person who is hired to evaluate a client’s needs and provide expert solutions on the basis of their requirements, whereas a contractor is hired to work according to the needs and guidelines of the clients.

Consultant                                                                              Contractors

They are hired for a specific task.They are hired to solve a particular problem or create an optimal solution.
They are experienced personnel but might not always be a subject matter expert.They are the subject matter expert.
They are mainly project-focused.They show role ownership.
They are responsible for a short-term engagement.These are career-focused.

What are the things to include in a Consultancy Agreement?

Consultancy Agreement is widely used by different kinds of businesses to solve their problems and increase the productivity of the organisation. Some of the important things to include in a Consultancy Agreement are:

Details of the consultant and the relationship: It is very important to include full details of the consultant along with their registered business information. The agreement should make it clear as to what and how the relationship between the consultant and the client should be.

Consultant duties and obligations: These are the duties and obligations that the counselor performs to carry out his work in the best way, and any breach of these obligations entails responsibility for the counselor.

Consultancy fee: The amount of money the consultant will be taking to provide his knowledge and expert opinion. There might be different payment schemes like a fixed lump sum, fixed monthly fee, based on the amount of time worked, etc.

Duration: It is the period during which the consultant provides his services. The start and end date of the project.

Services offered: A consultant is normally hired to provide some form of specialised services. So, a clear breakdown of the services or the agendas for hiring a consultant should be properly written. The agreement should cover the entire scope of services.

Non-competition clause: This clause will help the party who is hiring a consultant by minimising the risk of competition. A consultant is obligated not to consult another client who could compete with the existing client in the same field or to work for a competitor to the contracting party that the advisor previously contracted with.

Force majeure: This is a clause placed in the Consultants Agreement in the case that an extraordinary event prevents either party from performing the obligation. If the delay or non-performance continues for a certain period, the party affected may terminate this agreement by giving a certain period of written notice to the other party.

Conflict of interest: This clause prohibits the consultant from being involved in multiple interests, financial or otherwise, as serving one interest could involve working against another. Typically, this relates to situations in which the personal interest of an individual might adversely affect a duty owed to make decisions for the benefit of a third party.

Consultant independence: The consultant shall have the freedom to perform the contract as an independent contractor and not be worked down as a servant or an employee with an employment contract.

Ownership: This is another important clause to include in a consultancy agreement. It mentions who the owner of the final work will be. During the time when the consultant and clients are engaged in a professional relationship, there will be numerous creative works such as intellectual property and copyrights upon which ideas will be exchanged and so the agreement needs to be clear about who will own the final property.

Confidentiality: along with ownership, some details of projects that the consultant and client work together on could have sensitive information which cannot be divulged. Hence, this clause shall specifically state that the consultant shall not divulge confidential information about the Client.

Governing Laws and Jurisdiction: Consultancy services can range widely. it can include varying types of services across industries. Governing rules for dispute resolution,  mediation, payments, and others can vary according to regions, states, and governing authorities and as per services as well as industry. So, always ensure that your consultancy agreement is in line with local laws.

What is the difference between a Consultant Contract and a Consultancy Agreement?

They’re both the same thing.

Are Consultancy Agreements legally binding?

A Consultancy Agreement can be terminated in two ways. One by written notice and another can be in effect immediately if either party is in breach. Some common grounds for breach are: any misconducts, negligence, or incompetency to perform or deliver, failure to comply with the preset terms and policies. The contract is also dissolved if the company goes into liquidation or bankruptcy.

How can this contract be terminated?

A Consultancy Agreement can be terminated in two ways. One by written notice and another can be in effect immediately if either party is in breach. Some common grounds for breach are: any misconducts, negligence, or incompetency to perform or deliver, and failure to comply with the preset terms and policies. The contract is also dissolved if the company goes into liquidation or bankruptcy.

What are the benefits/advantages of a consultancy agreement?

  • Clarity of responsibilities: Experts with astute knowledge of their sector can think from different perspectives and looks at situations from varying lenses. However, when hiring a consultant for your project you usually need support on specific topics or sectors. An agreement has a detailed description of the scope of work hence making it clear as to what the expected outcome is. 
  • Legal protection: as a legally binding document, it contains the wishes, rights as well as duties of each party mentioned in it. Hence it provides legal protection if there is ever any dispute in the future. It is proof of what was agreed upon in advance.
  • Confidentiality is ensured: A verbal agreement could be a way of getting assurance that a consultant will keep things confidential, but the better way to go with this is definitely to have it in writing and in legal forms.

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