WHAT TO INCLUDE IN A CONSULTANCY AGREEMENT?

When an entrepreneur opens his own company, he always ensures that he has all the required agreements and contracts in place. At the initial stage of business, it is always advised to hire a consultant to provide his expertise for the rapid growth of the company. These consultants secure a better position for the company in the market by improving profitability and management efficiency. However, every relationship in business terms is bound by a legal document called an agreement. An agreement in this sphere is known as a consultancy agreement.

WHAT TO INCLUDE IN A CONSULTANCY AGREEMENT?

WHAT TO INCLUDE IN A CONSULTANCY AGREEMENT?

When an entrepreneur opens his own company, he always ensures that he has all the required agreements and contracts in place. At the initial stage of business, it is always advised to hire a consultant to provide his expertise for the rapid growth of the company. These consultants secure a better position for the company in the market by improving profitability and management efficiency. However, every relationship in business terms is bound by a legal document called an agreement. An agreement in this sphere is known as a consultancy agreement.

Whenever a company hires an external consultant to avail of his services at a fixed cost, it always enters into a consultancy agreement with him. These agreements are signed between the company and the external consultant as it outlines the scope of work, functions, and other terms regarding the appointment of the consultant. In order to avoid disputes, financial losses, and lawsuits in the future, it is always advisable to draft a consultancy agreement between the parties.

While a consultancy agreement essentially contains the names of both the parties, their signatures, and their functions, the basic structure depends from company to company. It generally contains the following provisions:

a. SCOPE OF WORK: The consultancy agreement should provide an elaborate illustration of the functions, duties, and obligations of both the parties. It should contain details regarding the work hours of the consultant along with details regarding work outside the office. The scope of work may vary from project to project thereby increasing responsibilities. In such circumstances, the agreement should be altered and modified as per the requirement to ensure a written record for the same and to avoid any misunderstanding in the future. Thus this part of the agreement makes sure that the disputes are avoided as much as possible by outlining a detailed study about the nature and scope of work to be done.

b. PAYMENT SPECIFICATIONS: The payment terms include the amount to be paid to the consultant depending upon the nature and hours of work. Similarly, if a project requires the consultant to travel, it must reimburse him for his expenses. The mode of payment along with the time when the payment is made (monthly, quarterly, etc.) should be specified very distinctively. It is very essential for a startup to clear its payments and dues on time so that it can create goodwill in the market to ensure a better scope for growth.

c. TENURE: The term for which the expertise of the consultant is required should be mentioned in the contract. The company must provide deadlines and timelines within which the work is expected to be done along with the nature of work expected from them. By specifying the tenure beforehand, the company ensures safety from any lawsuit due to objections and a smooth flow in the working procedure.

d. CONFIDENTIALITY: One of the most important clauses is the confidentiality clause. This prohibits the consultant from disclosing any private company information even if it is related to his work profile. However, in order to avoid confusion, the information that is already known to the general public is mentioned too. The consultant is made to sign this agreement to make sure that he is bound by laws and cannot disclose any information during or even after his tenure has ended.

e. DISPUTE RESOLUTION: If there is any breach of contract or either of the parties want to terminate the contract before it has elapsed, this clause comes into action. The dispute resolution is extremely necessary to avoid lawsuits and to maintain the goodwill of the company in the market. Though it is highly doubtful that any legal action will ever be taken by either of the parties, prevention is always better than cure. In fact, it also helps in maintaining good relationships and saving court fees by not taking matters to the court.

f. TERMINATION CLAUSE: This clause specifies provisions regarding the rights of the parties to terminate the agreement. An exit strategy is always planned and mentioned in the agreement to avoid future disputes. Certain criteria for termination can be specified like dissatisfaction from work or not getting paid on time etc. However, either of the parties can terminate the contract due to other reasons too by giving notice beforehand.

It is to be acknowledged that a consultancy agreement need not be drafted by a lawyer or any other professional to be admissible in court. It can be written by anybody in order to save the costs of consulting an attorney. The consultancy agreements are beneficial for both the consultant and the company but, it usually protects the consultants more by providing professional liability insurance. The consultancy agreement does not only prevent disputes but also safeguards intellectual property. Hence, it is in the best interest of both the parties to draft a well-structured consultancy agreement.

 

BY:-

Ridhika Kapoor