Dear Consultants: Do You Have an Effective Contract for Services?
Each and every day, you assist business owners with complex issues, but have you reviewed your contract for services? Does your contact cover important issues should your contract relationship take a turn for the worst?
Here is a description of five areas that should be addressed in any consulting contract:
- Description of the Services. Most consulting contracts have some description of services. Yet, if a third-party would review the language, would that party be able to understand the parameters of the description? It is important for the description of services to be understandable and include a timeline. Outcomes outside of your control should not be guaranteed. Also, the description should include a conspicuous (e.g. words with bolded, capitalized letters) clause that requires the cooperation of both parties in the event the future doesn’t quite pan out as anticipated. You do not want to be liable for a breach of contract if future events rendered your targets impossible.
- Fees and Payment. While I know you love what you do for a living, it’s nice to be paid. Make sure your fees, whether hourly or fixed, are clearly set forth in the contact along with the expectations for payment. If a client does not pay as required by the contract, then the contract should allow you to terminate without any further liability to the client. Some consultants include a provision that requires the non-breaching party to send written notice to the other giving them a warning of the breach and a specific number of days to fix the actions causing the breach. Others opt to simply allow immediate termination in the face of a breach, including nonpayment.
- Accuracy of Information from the Client. Most consultants rely on the honesty of their clients and the accuracy of the information provided by their clients. After all, aren’t you on the same team? Well, let’s just say that I am amazed by the number of times when I talk to a consultant who is in hot water with a contract requirement because their client “forgot,” “hid” or just plain “lied” about pertinent information necessary to the consulting services. Make sure your contract protects you in the event a client is not completely honest with the information provided to you.
- Exclusive or Non-Exclusive. Some consulting arrangements allow the consultant to work for competitors in the same industry and some do not. And, some contracts are silent on this issue. While this issue certainly impacts the nature of your relationship with your client, it also impacts what you are able to do for your other clients that may be in the same industry or seeking the same goal — perhaps a contract award or some pot of money. The nature of the relationship may also impact the level of confidentiality that you are able or willing to provide a client.
- The Miscellaneous. We, lawyers, love our “miscellaneous” sections, but these provisions are important and should not be overlooked. For example, an assignment provision will discuss whether you or your client is able to transfer rights under the contract to another party. A governing law and jurisdiction clause will discuss the particular state law that will be used in interpreting the contract and, in the event of a dispute, where can a lawsuit be filed? The miscellaneous provisions may also include a provision that requires any amendments to the contract be in writing and signed by both parties and a severability clause that provides if any portion of the contract is unenforceable, the rest of the contract is remains intact.
Taking a proactive approach to your consulting contract will reduce the risk of a contractual dispute and allow you to focus on ways to assist your client.
DISCLAIMER: The information provided is for general informational purposes only. This post is not updated to account for changes in the law and should not be considered tax or legal advice. This article is not intended to create an attorney-client relationship. You should consult with legal and/or financial advisors for legal and tax advice tailored to your specific circumstances.