What to include in your consulting agreement

In today's fast-paced business world, many companies hire consultants for projects that last anywhere from a few hours to a few months or longer. Consultants are often freelancers, meaning they aren't the client's employees, so the client doesn't have to add them to the payroll or provide employee benefits such as health insurance. As experts in their field, consultants possess knowledge about a particular subject the client needs to improve their business.

Different types of consultants

Consultants represent all types of industries. Good consultants follow industry trends and learn as much about the topic, product, or service they're advising on.

While consultants are found in just about every industry, some of the more common business fields are:

• Investing
• Marketing and advertising
• Sales
• Real estate
• Tax
• Computers and technology
• Diversity training

Common clauses in a consulting service agreement

Before the consultant commences work for the client, the two parties should sign a consulting agreement to protect both sides in case of nonpayment, failure to deliver services, or problems that arise between the consultant and the client. The agreement also defines the duration of the consulting arrangement and the consultant's compensation.

Consulting agreements can be simple or complex. However, a standard consulting agreement usually contains some of the following clauses and language:

1. The date the parties enter into the agreement, listed at the top of the contract.
2. The names of both companies and their business addresses.
3. The type of consulting being offered, with as much detail as possible, and that the client desires to hire the consultant to perform such consulting services pursuant to the terms of the contract.
4. The duration of the agreement, with start and end dates noted. Alternatively, the agreement can state that the relationship ends when the consultant has completed the project in question, although it's preferable to pick a specific end date, as both sides may not agree when the consulting service has ended.
5. Terms of termination of the consulting agreement, which usually includes one party giving sufficient written notice to the other party and how many days' notice the party must give. Termination can also result from any breach of the contract.
6. Compensation for the consultant, including how much, payment schedule, and how, if necessary, the consultant must provide invoices.
7. A statement that the consultant is to keep the client's product and company information confidential, such as industry secrets, designs, ideas, how the company is performing, and anything that a competitor could use to its advantage against the client.
8. A noncompete clause, requiring the consultant not to compete with the client's business at a similar type of company during the service contract and for a specified period of time after the consultant completes the work. The clause can also state that the consultant agrees not to work for the client's competitors or customers and not to solicit the client's employees.
9. A statement that the relationship between the parties is that the consultant is an independent contractor and not the client's employee or partner.
10. A statement describing who owns the property or intellectual property, such as copyrights, to any product created by the consultant.
11. The state where the agreement is governed, which is usually picked by the party preparing the contract.
12. A statement that the agreement is the entire agreement between the parties and no oral promises are part of the contract unless specifically included herein.
13. A statement that each party is not liable to the other and is not in default for any delay due to acts of God (such as earthquakes, floods, hurricanes) or other unforeseen catastrophes.
14. Signatures and titles of an officer from each party.

Whether you're a consultant or a client looking to hire one, you can draft a simple agreement based on the above information. Consulting contracts, however, usually contain legal terminology about warranties, liabilities, and indemnification, so that each company isn't liable to the other under certain conditions.