A consulting contract is an agreement between a professional advisor and a client. A consulting agreement is an essential tool for consultants and can make all the difference when it comes to claiming variations and getting paid.
A consulting contract can be as straightforward as a fee proposal with terms and conditions, or it can be a long and complex agreement that incorporates several documents. Either way, it is important for professional consultants to make sure they have a written consulting contract that protects their business and, just as importantly, their bottom line.
Author: Farrah Motley, Legal Principal of Prosper Law and a commercial contract lawyer.
A consulting contract sets out the rights and responsibilities of the parties
Scope of services
A scope of services defines what a consultant is going to do for the client, in exchange for payment. It is important for a consulting contract to clearly describe the consultant’s services in a way that is clear and unambiguous.
For example:
if the consultant has allowed for a specific number of meetings in the fee, the number of meetings allowed for should be clearly described
any value management services (including any limitations) need to be outlined so that the client is getting value for money, but the consultant is not doing extra work for free
the extension of any reporting or status updates should be described; for example,
whether weekly or monthly reports are required and the format of those reports
Claiming variations
Claiming variations is not always straightforward for professional consulting firms. There is a tug-of-war between:
being competitive and providing fair pricing at the risk of quoting too low and squeezing profit margins; and
quoting too high and losing a prospective project to a competitor
Because of this, it can be tempting to agree to a variation clause in a consulting contract that is too restrictive and difficult to comply with. If a variation clause is difficult for a consultant to comply with:
it may not be possible to submit a variation claim within a short time frame Clients may refuse a variation claim on the basis the scope is already included in the fee
or does not amount to a ‘variation’ under the terms of the consulting contract
the project may be completed, but the consulting firm make not make any profit
the consulting firm may end up doing more work for the same price
The best way to ensure that a variation is able to be claimed and is payable in a fair way is to negotiate a consulting contract that is fair.
A consulting contract can define the scope of services
A poorly defined scope of services is undoubtedly a common cause of scope creep. To avoid scope creep, it is important to ensure that a consulting contract includes a specific, unambiguous and detailed scope of services.
A consulting agreement that has a well-written scope is beneficial for both the consultant and client. This is because both parties will know what they are signing up to at the outset and will have an agreed, presumably objective scope of services to refer to.
A consulting contract can be relied on by a consultant to get paid
No matter what industry a consulting firms work in, getting paid can be a challenge. If a consulting firm doesn’t have a written contract in place with a client, it can be very difficult to prove an entitlement to payment or even that there was a contract in the first place.
A consulting contract can be relied upon by a consulting firm as evidence to prove that:
there was an agreement for the client to pay the consultant
the consultant has satisfied any relevant preconditions to claiming payment
the client has not paid the consultant according to the agreed payment terms
A consulting contract describes who owns intellectual property
Professional consulting firms are generally selling intellectual property to their clients. That intellectual property might take the form of copyright that subsists in:
architectural drawings or engineering drawings
written reports or proposals
designs
presentations
photographs, sketches, paintings or artworks
music and sound recordings
Or it might take the form of design rights in clothing and apparel designs.
Whatever the intellectual property, it is important to appropriately describe who owns the intellectual property.
It is also important to describe what conditions must be satisfied before ownership in the intellectual property rights transfers to the client or is licensed to the client.
A consulting contract is a means through which a consultant can sell, assign or licence intellectual property.
How can Prosper Law help?
Prosper Law’s legal services are provided by Farrah Motley, an Australian lawyer that provides legal advice to professional consulting firms, including reviewing, negotiating and drafting consulting agreements.
Contact the team at Prosper Law today to discuss how we can provide you with a review of a consulting contract, including contract reviews and negotiations for a fixed fee or at affordable hourly rates.
Farrah Motley | Legal Principal
PROSPER LAW - A Commercial Law Firm for Businesses
M: 0422 721 121
A: Suite No. 99, Level 54, 111 Eagle Street, Brisbane, Queensland Australia 4000