You may not think you need a consulting agreement when working with a new client. But contracts ensure everyone is on the same page. Find out what to include in your agreements and how to avoid common – and potentially costly – mistakes.
Your business’s services may include consulting. While there are many different types of business contracts you may come across, you may not be completely familiar with what to include in your consulting agreements.
Contracts exist so that the exchange of goods, services, or information is legally protected and the expectations are clearly expressed. This ensures everyone is on the same page and aims to minimize disputes and problems.
The same is true for consulting agreements, which are important for any type of consultant. This guide walks through the purpose and benefits of consulting agreements, what to include, and best practices to follow when drafting and finalizing these legal documents.
Jump to:
- What is a consulting agreement?
- The benefits of having a consulting agreement
- What should be included in a consulting agreement?
- Common mistakes to avoid when writing a consulting agreement
- Legal considerations for consulting contracts
- Best practices for drafting a consulting agreement
- Writing effective consulting agreements with HoneyBook
Use HoneyBook’s ironclad contract templates to protect your business and clients.
What is a consulting agreement?
Consulting agreements may look different for each engagement, but they all have the same purpose: to outline the relationship between a client and the consultant (the service provider). Consultants perform many different services for businesses, from assisting startups with innovative ideas to covering sales for a company or consulting with a team on an effective strategy.
A consulting agreement comes into play anytime a service or compensation is exchanged. The agreement contains all the details about the relationship, including the services to be provided, timeline and deadlines, termination process, payment terms, pricing, and scope of work per project.
Using a consultant agreement is a must so that these terms are clearly outlined. You never want to be in a situation where one party doesn’t agree on something and there are no contractual terms in place for recourse.
The benefits of having a consulting agreement
There are clear advantages to having a consulting agreement in place. Such agreements benefit both the client and the consultant. Here are the key benefits to know:
- Clearly stated expectations before the engagement begins
- Outlined consequences or penalties if either party breaches the contract
- How and when the consultant will be compensated for their services, including the method of payment and the payment structure (e.g., flat fee, hourly, retainer)
- Legal protection when something goes wrong or a disagreement arises
- Information about how disputes will be resolved and under what jurisdiction
- All terms and conditions in writing and signed by the parties involved
Consulting agreements protect the parties involved, clearly state the terms and expectations, and show that both the client and the consultant have agreed to said terms. This is all key to establishing legal protections and setting the relationship up for success.
What should be included in a consulting agreement?
Consulting service agreements usually have certain terms and language as a standard, even while each relationship is different. Here are the basics to include:
- Contact information: Names, addresses, and other identifying details should be provided for the consultant and for the client.
- Dates: Indicate when the project or service starts and ends.
- Services: Clearly outline exactly what services will be provided, including how they’ll be delivered, and any related expectations about the services.
- Payment terms and fees: State exactly how payments will work, including the payment structure, method of payment, and payment rate. Include timelines for paying invoices.
- Termination: The contract needs to include procedures to follow to terminate the contract, if applicable.
- Intellectual property: If intellectual property will be exchanged, include terms about ownership of that property.
- Liability and indemnity: Outline who is liable for what and who indemnifies whom so there are no disagreements or misunderstandings later.
- Disputes: Indicate how and where disputes will be handled. There should be a clear process to follow in the contract.
- Confidentiality: Nondisclosure language may also be included so the parties know what they can and cannot disclose about the business or the relationship.
- Noncompetition: Noncompete clauses may forbid you from providing the same consulting services to the business’s competitors for a specific period of time during or after your work together.
- Signatures: Signatures indicate that each party understands and agrees to the contract in its entirety. Initials for specific pages or sections may also be required to emphasize this acknowledgment.
Consider using a consulting agreement template that has the contract bones already there for you. These terms ensure both parties are on the same page. HoneyBook’s legally vetted free contract templates is an easy way to get started with your contract. Templates give you the foundation for the contract and include all the essentials of a good contract. You can amend and append the template to suit your purposes.
Common mistakes to avoid when writing a consulting agreement
Now that you know what to include, there are a few pitfalls to steer clear of with consultant contracts. This is what to avoid in a consulting agreement:
- Vague language: Avoid language that could be read in more than one way or provides vague details. For instance, make the sure goals and objectives are specific, measurable, achievable, relevant, and time-bound (SMART).
- Poor communication channels: It’s wise to include details about how you’ll communicate with the client throughout the relationship.
- Ignoring legal nuances: Each state has its own set of laws and regulations. Make sure you closely adhere to state-specific requirements.
- Failing to edit templates: If you use a contract template, remember that all of the language may not apply to you. Carefully read through all of the terms and customize the contract to your needs.
- Lack of written agreement: Unfortunately, many consultants work solely based on a verbal agreement. This could set you up for lengthy disputes and even legal trouble down the road. Get everything in writing.
Avoid these mistakes with your consulting agreements. You never want to miss something important that could lead to a dispute or clash later on. Using a legally vetted contract template or talking to a legal expert can help.
Legal considerations for consulting contracts
It’s important to read through the contract’s language regarding disputes, ensuring the terms protect you should something happen. The dispute resolution section outlines the methods that will be used for resolving potential disputes that arise. These methods may include mediation or arbitration, but there should always be a clearly outlined process in the contract.
Additionally, include language about contract enforceability. This ensures the agreement is legally binding and enforceable in a court of law. Most contracts also include a clause about governing law, which indicates which state’s laws govern the agreement.
Usually, agreements will also prohibit a party from assigning the contract to any third party without the written consent of the other party involved in the contract.
Best practices for drafting a consulting agreement
Now let’s discuss best practices for getting your consulting agreements done right. Here are a few pro tips that will help ensure your success:
- Clearly define the scope of work: The deliverables, timing, and payment details should be crystal clear. Don’t include anything indefinite.
- Outline the payment terms: Include how and when payments will be made and how long the client has to pay an invoice, such as 45 days.
- Include confidentiality and intellectual property provisions: It’s always smart to outline who owns the intellectual property being referenced or exchanged, in addition to what information cannot be disclosed to third parties.
- Define the time frame of the agreement: Clearly state how long the contract or project lasts.
- Establish communication channels: Client communications need to be seamless and transparent. HoneyBook’s clientflow management platform helps you easily facilitate communications with your clients.
- Include termination clauses: Some agreements may be ongoing indefinitely, but they still require procedures for termination. One clause to include is the force majeure, which states what will happen if there’s an unexpected event like a natural disaster.
- Outline your independent contractor status: It’s important to state that you’re not working as an employee of the other party and are instead operating as an independent contractor.
- Review the noncompete and non-solicitation language: Make sure you can agree to the client’s wishes regarding noncompete and non-solicitation language, which is when you agree not to solicit anyone from their business.
- Seek legal advice: Remember that you can always talk to an attorney about the terms you’re drafting and agreeing to. This ensures you don’t miss anything important.
- Review with the client: Meet with the client to review everything in the contract, and revise as needed to prevent misunderstandings. This ensures everyone is aware of the project details and expectations.
- Use templates: A template can be a lifesaver with consulting agreements. Just make sure the one you use meets the specific needs of the project at hand. Take a look at HoneyBook’s contract templates when in doubt.
- Finalize and execute: Always get your contracts signed and sealed with approval and signatures from all parties involved.
Writing effective consulting agreements with HoneyBook
Following contract writing best practices and avoiding the common pitfalls will help ensure your consulting contracts are legally binding, fully protect you, and clearly establish all of the services and details of the relationship. Having a well-written agreement in place is a must.
You can rely on HoneyBook’s clientflow management solution to draft and manage your consulting agreements. Moreover, you can set them up as online contracts that your clients sign as soon as they book your time, streamlining the process for all involved.
Use ready-made attorney-review contract templates on HoneyBook.
