What to include in a consulting agreement or contract

A consultancy agreement template in Australia is a way of buying or selling consultancy services using the same group of legal terms and conditions. A template consulting contract can save time when negotiating contracts.

What’s more, having a templated consulting contract can protect your business by including consultant insurance* requirements (such as your risk profile). While Professional Indemnity is critical for consultants of all kinds, there are also other business insurance products that consultants may consider for reducing their exposure to risk.

Six essential inclusions for your consulting agreement

1. Commercial details

You can create a master professional services contract that you can update for every client. It is a simple matter of making minor changes to a contract template so that it can be used for every new project. You will still need to be careful in defining the specific commercial details for each client. These commercial details can be found on a schedule that you can add to your consulting agreement.

2. Payment terms

Under the terms of your consulting service contract should be clear direction regarding how payment will work. This will ensure that you receive full payment at the right time. Accordingly, your clients need to understand exactly:

• how much you are charging for your services; and
• when payment is due.

There are a variety of ways you may wish to handle payment. You may choose to charge:

• a fixed-fee for each project;
• an hourly rate; or
• an upfront deposit, with the remainder due on completion of a series of deliverables.

Your client must pay you within the timeframe set out on your invoice. Therefore, it is a good idea to include a clause in your agreement that relieves you of your obligation to continue providing your services if you do not receive the correct fees. Additionally, you should be clear about whether you will charge for any additional expenses you incur when providing consulting services.

For example, in your consulting service contract you may choose to pass on the cost of travel, printing expenses, or government fees to your client.

3. Intellectual property

Consultant legal jobs are in demand in Australia. You may have been a consultant for many years, or perhaps you are new to the field. Either way, you will likely develop some of your own intellectual property (IP) that you will use to provide your consulting services. This might include:

• data;
• processes;
• methods; and
• research

To help protect your IP from misuse, your consulting agreement needs to set out what happens to any:

• pre-existing IP you or your clients hold;
• new IP you create or improvements you make to pre-existing IP;
• consider retaining the rights to your pre-existing IP that you use as you provide your services. Similarly, your client will want to retain ownership of their pre-existing IP.

In terms of new IP, you will need to decide whether:

• you will own this new IP and license it to your client; or
• your client will own the new IP outright.

If you continue to own new IP and improvements, you will need to give your client a license to use such IP so they can benefit from the services you provide. If you plan to assign new IP and improvements to your client, this assignment should not occur until your client pays for your services.

4. Dispute resolution

Despite your intention to minimise the risk of disputes by having a clear consulting agreement, disputes can still arise. Accordingly, consider having a dispute resolution clause in your agreement, which may help prevent lawsuits. This will set out the steps you and your client must take before initiating consultant legal action.

A dispute resolution clause will usually state that the parties must discuss the dispute, with the aim of reaching a commercially viable resolution. The next step may be to proceed to mediation. Your agreement should set out:

• where the mediation will take place; and
• who the mediator will be.

5. Liability

Your clients will want to rely on the information and advice you give them in the consulting services. But no-one is all right all of the time. For consultants, this means that you will need to take on a degree of responsibility for your professional advice and services.

However, as a consultant you can benefit from reducing your exposure to risk and reduce your responsibility for issues that might arise and prevent a lawsuit. Importantly, this involves restricting the maximum amount your client can claim from you if you breach the contract.

You should also exclude liability for events outside of your control, such as:

• your client’s actions;
• the actions of third parties; or
• “consequential loss”, such as loss of profits or business opportunities.

6. Termination

Both you and your client will likely enter into a consulting agreement with the intention of meeting their entire obligations under the contract, for the term agreed. However, circumstances might arise where one party wishes to end the consulting relationship. Therefore, consider including a termination clause that governs this process.

For example, if your client is not providing you with the information that you need to do your job, you may wish to terminate the agreement.

Your termination clause will need to set out:

• whether you or your client can terminate the professional services contract earlier than it is supposed to end;
• how much notice is required to terminate;
• what each party is required to do upon termination (for example, you can require that each party return the other’s intellectual property and confidential information); and
• that your client will need to pay you for services completed and expenses incurred up until the point of termination.

Protect your business with BizCover and consultant insurance

While consultants provide specialised and expert advice to their clients day in and day out, nobody can get it exactly right every time. And this is where consultant insurance can help reduce consultant’s exposure to risk.

While Professional Indemnity is considered a must-have for consultants, there are other policies that can further reduce your exposure to business risks. These include:

• Public Liability
• Business Insurance (also known as a BizPack); and
• Cyber Liability

Make consultant insurance easy with BizCover

The great thing about choosing BizCover is that we make consultant insurance fast, simple, and cost-effective. In fact, you can get covered in just 10 minutes, then get back to growing your consultancy business. Call us on 1300 920 868 if you prefer to chat.