A consultant is someone who has immense knowledge about any particular field say for example software development or human resource and could be hired by the company to solve their problems on a contractual basis. They are not included in the purview of employee and hardly provided any employee benefits. They basically work as an independent contractor so no principal and agent relationship could be established. They provide advice or other services as demanded by a company for a particular project within the said period of time.
Agreement defined as the reciprocal promises between two or more parties forming the consideration, stating all the requirements about the rights and obligations of your work. So, the consultancy agreement is a legal document which includes all the basic provisions through various clauses which define how the work would operate so that no future disputes would arise.
The key point mentioned in the agreement
- Name and address of the parties: ?At the very beginning the agreement should specify the names of the party i.e. the name of the consultant and the name of the client and their respective address.
- The scope of work: ?This is the most requisite part of the agreement especially for the consultant so that the client could not exploit by giving work which would be out of the scope. The agreement should specify what kind of work or services are demanded by the client. In that way, the expectation of the client as well as the consultant kept within the boundary of said provisions.
- Commencement: ?Basically, the time period from which the agreement comes into existence, also the time required for the completion of the work should be mentioned clearly in the agreement.
- Payment: ?It includes all the expenses spent by the consultant during the completion of work, mode of payment and most importantly the fee assigned for the work. As most of the dispute arises because of the lack of clarification in terms of payment so this clause must be negotiated before entering into the contract.
- Ownership: ?The client must clarify the rights and true ownership of the product involved especially if there is some intellectual property.
- Liabilities: ?As the consultant act as an independent contractor so there must be a provision to define who would compensate for any harm during the work.
- Intellectual property right: ?The work must not infringe any third person intellectual property right.
- Confidentiality: ?There is information present between the parties which is required during the course of work and the guarantee of not sharing of information is important because that's how the trust would strengthen.
- Termination: ? During the work, there would be times when the expectation could not meet, in that case, the agreement meant to call off but by giving prior notice and explaining the reason.
Now the agreement clearly laid down the provision for all such circumstances. By laying down the clauses according to the aspiration of the parties a proper agreement is formed.
The need of consultancy agreement
- As a consultant you can choose the scope of your work according to your expertise without any arbitrary force, a complete freedom to work,
- According to a study, the consultant earns more than the usual employee around 20% to 30 %, and
- If you are a regular employee you are subject to many taxes but in case of being a consultant, you are excluded from the purview of many taxes.
- Efficiency in business is something which could not be compromised so the need of hiring a consultant and drafting agreement eventually improves efficiency.
- Protect both the parties and nullify any future dispute regarding the rights and obligation of either of the party.
- Protect the confidentiality of company by penalizing if any breach would take place.
- Establish a proper business relationship between the client and the consultant.
So, to have a written consultancy agreement provides all these benefits.
Steps involved while generating consulting agreement
- Create the title,
- Name the parties,
- Record the dates,
- Define the work that must be done,
- Define the compensation,
- Define Relationship between parties,
- Provision for intellectual property and copyright of parties,
- Confidentiality term if exist,
- Define general clauses, and
- A signature clause.