Consultancy contracts: The top 5 things you need to consider

July 6, 2017

Getting a consultancy agreement signed before any services are provided should be a priority for any consultant or client. A contract protects both parties by setting out their obligations clearly and reducing the risks of any misunderstandings or disputes.

Without it, you are relying on a verbal agreement, which is unlikely to be the same agreement in the minds of both parties, or cover all of the issues.
Any contract should be written in plain English to ensure that everyone understands and agrees with it. It should contain all the terms that are relevant to the parties and the services being provided, while allowing for flexibility and a process to make changes if necessary.

  1. Parties: Make sure that you get the parties to the contract right, particularly for the contractor. Is the contractor providing their services personally as a sole trader or are they providing their services through their own limited company? If you get this wrong, it can affect the tax treatment of any payments.
  2. Services and Responsibilities: Set out the services to be provided, the standards required and each party’s responsibilities. This avoids mistakes by either party about what is to be delivered, reducing the risk of creep. This is where the list of services increases (or decreases) without a corresponding change to the price or timescales. This can also affect the tax treatment of any payments. Outline what each party has to do and how things will be put right if the services are not up to the standard expected.
  3. Time frames and payments: Any milestones or time frame for the services should be made clear in the contract, with a process for dealing with any slippage or adding extra services during the period of the contract. Make clear what payments are due and when, and clarify the process for making the payments and what happens if they are not paid on time. If the payments are dependent on certain services being provided or time frames being achieved, make this clear. 
  4. Confidentiality and Intellectual Property: Define both parties’ obligations in relation to confidential information and what steps need to be taken to protect that information. Make clear who will own any intellectual property relating to the services and when will this transfer. Most intellectual property rights will remain with the consultant unless specifically assigned to the client. If rights are transferring to the client, consider whether the consultant wants to retain any rights to use information about the services in future marketing.
  5. The end of the contract: How can both parties end the contract? Is the contract for the life of the project or will it continue until either party gives notice to the other party? Make sure you can end the agreement if the other party does not follow the contract or correct a mistake, or their business gets into financial difficulty. If there are any obligations after the contract ends, for example, to make certain payments, and return any materials or information, include these in the contract. Don’t leave it to chance that this will happen.

Louise Paull, expert Employment LawBrief for LawBite. To consult with Louise about any employment matter or to have your Consultancy Agreements reviewed (particularly in relation to IR35) you’re welcome to submit an enquiry here.