A consulting contract outlines the terms of a relationship between a consultant and a client. Here's what yours should include.
- A consultant contract is a document that defines the terms of service between a client and a consultant.
- Consultant agreements are important because they outline what work will be done, as well as the terms of the agreement between the client and the consultant.
- A consultant agreement should be detailed and include compensation terms, contract termination, intellectual property ownership and confidentiality agreements.
- This article is for business owners or consultants who want to learn more about consulting contracts and what they should include.
If you are a consultant or a company looking to hire a consultant, you'll need a contract. A consulting contract or agreement is an important legal document that can help you establish goals, outline work to be done and provide the terms of a professional agreement between two parties. Read this guide to learn what a consultant contract is, to find out what should be included and to see examples of templates so you can create your own contract.
What is a consultant?
A consultant is a professional who provides expert advice or knowledge in a particular field. Consultants can work in any specialized industry, including business, education, law, marketing, finance, healthcare and more. Utilizing a consultant allows companies to supplement their existing workforce by bringing in an outside perspective that can also help to increase production and efficiency, streamline operations and assist teams in working through difficult projects or issues.
Consultants typically offer four categories of services:
- Strategic advice. This is what most people associate with consulting. Strategic advice consists of offering targeted advice to problem solve and tackle specific issues.
- Done-for-you service. The consultant offers a service done in full to the client, rather than just advice.
- One-time training. The consultant holds a training session in an area where the client needs help, such as sales, a new regulation or mentoring.
- Ongoing coaching. This category offers long-term results and is a common method for small business owners who want to expand their business themselves instead of hiring someone to do it.
Key takeaway: A consultant is a professional who provides expert advice, knowledge or recommendations related to a particular field.
What is a consulting contract?
A consulting contract – also known as a consulting services agreement, an independent contractor agreement or a freelance agreement – is a document that defines the terms of service between a client and a consultant.
A consulting contract is an extremely important document, since it helps to define exactly what is expected between the consultant and the client, protects the interests of both the consultant and the client, and ensures that the consultant is properly compensated at the completion of the project.
Why is a consulting contract important?
A well-written and comprehensive consulting agreement is important for both the consultant and the client because it provides a reference for what the expectations are for both parties and what financial compensation is expected at the end of the project. Additionally, a consulting contract provides the following benefits:
- Identifies the work. The primary purpose of a consulting contract is to define the scope of the work to be done. The client will detail exactly what they need the consultant to do, when they want it done by, how they want it done, etc. Having a written record of the services the consultant will provide will help to manage expectations and avoid confusion.
- Opens up new opportunities. A consulting contract can also be used by the consultant to further market their services and provide opportunities for the client and the consultant to work together in the future. Once one project is completed, the client and consultant can review the contract together and identify new problems or projects to work on.
- Clarifies the client's responsibilities. It's important for the contract not to focus only on what the consultant is responsible for. Make sure the client's responsibilities are laid out clearly as well, including participating in seminars, trainings or work; awarding financial compensation; and providing materials or responses in a timely manner.
- Establishes a relationship. This aspect goes beyond establishing a professional relationship between the client and the consultant. A consultant agreement can be used for tax purposes to prove that a consultant is an independent contractor and not an employee of the client.
- Protects intellectual property. A consultant contract identifies what information and resources will be used in the course of the work and whether the consultant or client has access to particular pieces of intellectual property, and for how long.
- Sets the terms of payment. It is very important for the terms of payment to be agreed upon early and put in writing in the consulting agreement, to avoid any conflicts once the work is completed. The contract should denote how much the consultant is paid, how often the consultant is paid and how the consultant will bill for their time.
Key takeaway: A consulting contract is a document that defines the terms of service between a client and a consultant. It's important because it gives a written record of the terms set between the two parties.
What should you include in a consulting contract?
Because every client-consultant relationship is different, there is no single exhaustive list of exactly what must be included in every contract. However, you should be sure to include the following standard elements:
You should include the names, addresses and contact information for both the consultant and the client.
Create a list of all of the services that the consultant will provide, making sure to include as much detail as you can regarding the services and the timeline for the tasks to be completed.
"This is the easiest place to end up in a professional quagmire," said David Cusick, chief strategy officer at House Method. "Consultants often face 'scope creep,' meaning their projects grow larger the more they work on them. This happens when the limitations of your work aren't clearly defined in the contract."
Duration of the agreement
This section outlines how long the client and the consultant will work together and how long the contract is valid for.
Terms of termination
This section dictates how the agreement can or will be ended. Typically, terms of termination require that one party give sufficient written notice to the other party and outline how many days' notice is considered sufficient. You can also stipulate here that termination is possible as a result of any breach of contract.
Include exactly how much the consultant will be paid, when they will be paid and how the consultant should bill for their time. This is another place where you should be as detailed as possible.
Confidentiality, noncompete and nonsolicitation agreements
If your company or your business works with sensitive material, be sure to include a confidentiality clause or nondisclosure agreement (NDA) in your consulting contract. This will help to protect any information dealt with during the course of your work with the consultant. You can also include noncompete or nonsolicitation agreements, which will prevent the consultant from competing unfairly or soliciting additional business from the client.
Materials and intellectual property
This section should address who owns the rights to any intellectual property used or created during the course of the client-consultant relationship. Make sure you are as detailed and as clear as possible in regard to who owns which materials.
Key takeaway: A consultant contract should be detailed and include things such as the duration of the agreement, compensation, confidentiality agreements and termination details.
Tips for consultant contracts
There are many ways to ensure that your contract performs well for both parties and that your experience creating a contract goes smoothly. Here are some tips:
Know your goals going in.
The best way to ensure a well-written and detailed consulting contract is to know what you want to accomplish going into the process. This helps you keep a clear mind and make sure the contract gets you to where you want to be.
Carefully read over the entire agreement.
Before signing, make sure you read over the entire contract and ensure that it helps you reach your goals, is fair, and outlines everything clearly and in detail.
Be open to renegotiation.
A contract doesn't have to be signed as soon as it is written. It is the responsibility of both parties to ensure that the contract is fair and fulfills all of their needs. It is much easier to renegotiate a contract before it is signed than after.
Include the details.
When it comes to contracts, too much detail is better than not enough. Note all of the specifics, even if they seem straightforward or obvious. Having every point stated clearly in writing will help to prevent conflicts.
"It can get wordy, but a more thorough contract will better protect you against people who want to take advantage," said Dan Bailey, president of WikiLawn. "You need to be thorough."
Review state laws.
States may have different laws regarding independent contractors, so it's a good idea to have an understanding of the laws and regulations in the state where you will be working.
Keep a hard copy of the agreement.
Have each party sign two copies of the contract so that both the client and the consultant have a signed copy to keep in their records.
Consider having a lawyer review the contract.
This isn't typically a requirement, but you may find it helpful to have a lawyer look over or help you draft your agreement to ensure its validity and fairness.
"Find solid legal counsel to help create a baseline consulting agreement that can be modified as necessary," said H. Michael Schwartzman, principal at DevelUp Inc. "You cannot risk your business or livelihood on a poor agreement, so finding a good attorney is critical to a successful business practice."
Key takeaway: To have a successful consultant agreement, be as detailed as you can, read over the entire contract and be open to negotiation.
Consultant contract templates and examples
You can create your own consultant agreement, or your company may have a template available for you to use. If you choose to create your own, you can use one of these free, customizable templates to get started: