What Is A Consultancy Agreement?
A consultancy agreement is a legal agreement between a business and a consultancy agency, which can take the form of a company or an individual. The fundamental aim of a consultancy agreement is to clarify the duties and responsibilities of the parties involved in a business relationship.
When should a business use a consultancy agreement?
A consultancy agreement may be appropriate for use whenever a business needs to complete a specific project and requires the assistance of a consultancy agency. The consultancy agency will not usually be considered an employee of the business and hence, a consultancy agreement must be drafted in accordance with the law to define the terms of the relationship.
How is a consultancy agreement structured?
A consultancy agreement document can be structured in a range of ways. The structure of the agreement will depend on the following:
• Whether the agreement is between a business and an individual consultant or between a business and the consultant’s employer
• Whether the agreement covers the services of an individual or a number of people
• Whether the services are required for a specific period of time or are to be called upon as and when required
If the services are to be called upon as and when required, it may be useful for a business to draw up a master consultancy agreement for the provision of services and produce separate project statements as and when required.
What are the main elements of a consultancy agreement?
While there are several elements to a consultancy agreement, the following elements are essential to ensure that both the business and the consultancy agency benefit from the business relationship:
The description element should detail the scope of the project to be undertaken and the purpose of the agreement. It should include the type of work the consultancy agency will be required to perform and the methods that will be used to meet a business’s requirements.
A consultancy agreement can be short-term or long-term. Thus, it is essential that the document contains details of the time frame of the agreement. The schedule element should detail any timelines agreed upon for the completion of key tasks. It must include the repercussions that the consultancy agency will face for failing to complete work in a timely manner and the criteria that will be used to recognise the project as complete.
The ownership element should cover the consultancy agency’s right to claim ownership over the final work. This section therefore deals with the various issues surrounding intellectual property rights.
The payment clause should detail the amount and form of the payment to be provided to the consultancy agency. It may also include information on expenses, budget restrictions and bonuses.
The warranty element must cover any warranties provided to the business by the consultancy agency. It may include the timescale in which a business must notify the consultancy agency of any errors or problems with the work performed and may detail any costs associated with the warranty.
The confidentiality clause should cover the terms of confidentiality the consultancy agency must uphold. This clause is important as the consultancy agency may discover a business’s trade secrets while performing key tasks. It must therefore define the legal penalties the consultancy agency will face for disclosing confidential information about a business.
The cancellation clause must detail the actions that need to be taken in the event of either party wishing to cancel the contract. It should include notice requirements, mechanisms for cancelling and cancellation fees and penalties.
Why draw up a consultancy agreement?
By setting up a consultancy agreement, a business will be able to specify the duties the consultancy agency will be required to undertake. Moreover, it will provide the consultancy agency with a description of their precise role and details of their rights and responsibilities.
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