Consultancy Agreement – An Overview

A consultancy agreement is a legal document signed when a company hires an external consultant or firm for a specific project or period. Instead of long-term employment, businesses bring in experts with specialised knowledge for particular tasks. This agreement acts as proof of the terms agreed upon, helping to prevent disputes or misunderstandings.

When Is a Consultancy Agreement Required?

• When a company hires consultants or agencies for specific projects.
• If the company lacks in-house expertise in a particular area.
• To avoid hiring full-time specialists for short-term needs.
• To reduce long-term employment costs.
• To ensure clarity and protect the interests of both parties.
• To legally bind both sides and prevent misunderstandings or disputes.

Who Is Involved in a Consultancy Agreement?

• The agreement is signed between the company and the consultant or consultancy firm.
• It covers the work scope, duration, payment, and other terms.
• Both the employer and consultant are bound by these conditions.
• Essentially, it serves as a specialised form of service agreement.

Elements of a Consultancy Agreement

• Scope of Work: Defines the consultant’s duties, responsibilities, and functions.
• Term: Specifies the period of consultancy.
• Payment Terms: Consultant’s compensation and payment details.
• Confidentiality: Protection of company’s confidential information.
• Termination: Conditions and notice periods for termination.
• Non-Competition: Restricts consultant from working with competitors.
• Non-Solicitation: Prevents solicitation of client’s staff or clients.
• Indemnification: Shields consultant from legal liabilities from the client’s side.

Draft Consultancy Agreement

1. Define the Parties
2. Define the Scope of Work
3. Define the Payment Terms
4. Define the Term and Termination Clause
5. Define the Confidentiality Clause
6. Define the Intellectual Property Clause
7. Define the Governing Law and Jurisdiction
8. Review, Sign and Execute

Advantages of a Consultancy Agreement

• Clearly defines the consultant’s contractual and legal responsibilities
• Protects the interests of both the company and the consultant
• Covers all key details about the employment and project
• Acts as legal proof in case of disputes
• Reduces the risk of litigation

What to Consider Before Signing a Business Consultancy Agreement?

• Review the agreement carefully and clarify all doubts with a lawyer.
• Raise concerns about any clauses you’re uncomfortable with.
• Use the agreement to define your working relationship clearly.
• Ensure there’s no conflict with your employer’s policies.
• Review confidentiality and ensure your rights are protected.
• Seek legal help to identify and resolve issues early.

How to Use This Consultancy Agreement?

• Used by either client or consultant to formalise a service relationship.
• Includes consultant/client info, office addresses, scope of work, and payment details.
• Can include confidentiality, non-compete, and non-solicitation clauses.
• May contain arbitration clause for dispute resolution.
• Must be signed on the appropriate stamp paper as per state laws.

Various Important Clauses of the Consultancy Agreement

• Scope of Services: Clear definition with annexure if needed.
• Defining the Relation: Declares independent contractor status.
• Governing Laws and Jurisdiction: Dispute resolution flow and applicable law.
• Point of Contact: Clarifies reporting structure.
• Payment: Details on invoicing, processing, and reimbursements.
• Surviving Clauses: E.g., confidentiality, non-solicitation post-termination.

Obligations of the Consultant:

• Maintain professional standards and ethics
• Deliver services as per scope
• No unauthorised commissions
• Accurate records in Indian GAAP
• Allow service verification

Obligations of the Client:

• Provide required data/facilities
• Adhere to payment terms
• Own and receive deliverables post-termination

Operation of the Agreement:

This clause handles unforeseen issues fairly between both parties.

Remedy for Breach of Agreement by the Consultant

Liquidated Damages and Penalties:

• Client may withhold 5% of each invoice as security.
• Delay penalties may apply at 0.001% of agreement value per day.

Suspension of Agreement:

Client can issue a notice for breach correction.

Termination of Agreement:

Defines termination rights and obligations for both parties.

Why Sperso Filings?

• We execute legal work for over 1000 companies every month using tech and legal expertise.
• Ensure a seamless process with government coordination.
• Two rounds of free agreement iterations included.
• Get started easily and conveniently with us.
• Need changes? Our lawyers will update and share it again for your review.