Last updated February 28, 2024
Alternate Names:
A Consulting Agreement is also known as a:
- Consultancy Agreement
- Consulting Contract
- Consulting Services Agreement
- Freelance Contract
- Letter of Engagement
- Terms of Engagement
What is a Consulting Agreement?
A Consulting Agreement, also known as a letter of engagement, is a contract between a consultant and a client in which the parties outline the terms of their professional relationship. This agreement can be written or verbal; however, a written agreement is often recommended because it provides tangible evidence of the agreed upon terms.
With a Consulting Agreement, both parties can clearly define their rights and responsibilities during their working relationship. For instance, LawDepot's Consulting Agreement template addresses information such as:
- The consulting services being provided
- The consultant's and client's contact information
- Payment (e.g. billing details, retainer fees, late fees, etc.)
- Other terms (e.g. expenses, ending the contract early, ownership of intellectual property, etc.)
Who should use a Consulting Agreement?
Anyone who is hiring a consultant or who has a role in the consulting profession can benefit from using LawDepot's Consulting Agreement template. With this written agreement, you can specify important terms of engagement that could be easily overlooked in a verbal agreement.
Contrasted to a verbal agreement, a written agreement can provide more protection for all parties involved. If a dispute arises between the consultant and client, they may have to present evidence to a court. While it can be difficult to prove an oral agreement, courts are generally obligated to uphold the terms of a written agreement.
How do you write a Consulting Agreement?
The information you'll need to complete this document includes:
- Whether the consultant is needed for a single project, a fixed term, or indefinitely
- The location where the consulting services will be performed
- The consultant's and the client's Australian Business Number (if applicable)
- Who, if anyone, will be responsible for superannuation guarantee contributions
The consultant and client should also have a conversation before drafting the Consulting Agreement to predetermine:
- How to bill the client (e.g. by charging a flat fee or hourly rate)
- Whether or not the consultant requires a retainer fee before starting any work (this may depend on the trustworthiness and financial stability of the client)
- If payments will be made when services are complete or at certain stages (such as being paid a certain percentage when reaching a project milestone)
- Whether or not there will be additional fees if a client is late with their payments
What other terms are included in a Consulting Agreement?
In addition to information about the client, the consultant, the services being provided, and the billing details, LawDepot's Consulting Agreement template allows you to address the following issues.
Ending the contract
There may be a time when one or both parties decides to terminate the contract before its official end date. In this case, you can set a period of time in the contract for either party to provide notice of early termination. As the consultant, you may also want to address partial payment for services in the event the contract is terminated after you've invested a significant amount of time or resources.
Expenses
It's recommended the client and the consultant have a conversation about how expenses will be handled prior to signing the contract so everyone is in agreement. If a client agrees to reimburse a consultant for expenses during the project, you can specify if the expenses need to be pre-approved and set guidelines for submitting expense claims. For instance, travel costs are often included in a client's expense budget, but guidelines might set a limit of $750.
Intellectual property
Intellectual property is any product, tangible or intangible, that originated from someone's mind and has commercial value. For example, many consultants produce creative works for clients, such as blueprints, custom software, logos, or advertisements, that are considered intellectual property.
It's important to address whether the client or the consultant will retain exclusive ownership rights to the intellectual property. Without an agreement, ownership rights will typically be awarded to the client for whom the work was created. However, some consultants may choose to retain ownership rights because they consider the property to be a “tool of trade” (i.e. a skill or piece of equipment needed to complete a job).
For instance, a software developer may use a unique computer program to build a new application for a client. The computer program gives the developer a competitive edge, so they keep the rights to the program but surrender the rights to the newly designed application. In this case, the client may have a license to use the computer program to implement the application, but they do not own exclusive intellectual property rights.
Confidentiality
Clients tend to trust consultants with sensitive company information because they are hired to provide expert and professional advice—often specialising in fields like company strategy, operations, finances, information technology, or human resources. As such, it can be beneficial for consultants and clients to address terms such as the duty of confidentiality when handling sensitive information.
You can specify in your agreement whether or not a consultant is required to keep information confidential for an indefinite period of time, until the end of the agreement, or (if it's not relevant) not at all. It's important to consider how a company may be affected if confidential information is shared publicly.
For example, if a competitor learns about your product design before the product is released, they may take that design, improve on it, and release a similar product before you.
