Many of our new clients are former corporate refugees going out on their own to perform consulting or other client services. They may have used consulting agreements, formal contracts or Master Service Agreements (MSAs) in the course of their full-time employment. When it comes to drafting their own agreements, often there is confusion as to what terms to include, how to customize an agreement and how to make sure the agreement works for their particular business.
What are some typical terms to include in a consulting agreement or client services agreement? The following are common terms that may be relevant in a contract:
Scope of Work (SOW): a tight scope of work ensures that a consultant or other service provider performs only the work both parties have agreed to. Often what happens is that once a consultant gets into a project, the client asks for additional work or work different from that originally discussed. This is where a tight scope of work comes in. The parties simply need to look at the contract to determine if the work is within scope or requires an addendum and potentially additional fees.
Term and termination provisions: the contract should normally be for a specified length of time and not completely open-ended. Also, if the contract is in progress and either side wishes to terminate prior to completion, the contract should have provisions for termination.
Intellectual property ownership: this is a huge area we see the parties fight over frequently. Often, the party hiring the consultant will want to own any materials, ideas or work product created by the consultant. If the consultant has provided similar services to similar types of clients, it may be impossible for the consultant to distinguish between pre-created intellectual property and what is created solely for the client. It's important to have well thought out provisions about the ownership of intellectual property.
Confidentiality and Non-Solicitation provisions: The parties may learn confidential information about the other side, such as pricing, client lists and business strategies. If this information were released to competitors or the outside world, it could cause harm. Non-solicitation provisions will prevent a consultant from poaching existing clients or staff of the business hiring them, as well as preventing the hiring business from poaching staff of the consultant.
Many consultants grab a template online or from a friend. This can be a huge mistake as the terms are not customized for the consultant's actual business model, its type of clients and does not accurately reflect the way the consultant wants to do business. A bad contract can result in failing to get paid timely, failing to get paid at all, having your intellectual property change ownership, or even force you to litigate a claim in a faraway venue.
If you need help getting a custom consulting agreement or client services agreement in place for your business, reach out to our firm for help on having a custom contract drafted for your business.
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