A consulting services agreement, or contract, is a legal document calling for one party to provide consulting services to another in return for compensation. The agreement defines the working relationship between the parties for the required services. Services can be contracted for a one-time assignment or continuing services.
A contract defines the understanding two parties have on how they will work together on a consulting project. The contract documents the services or work products that will be provided and the overall requirements for providing them, and it defines the procedures and remedies if disputes arise.
Provisions that are common or typical to consulting services agreements include a definition of the services to be provided; the compensation for the work; invoicing and payment terms; qualifications or other requirements of the personnel that will be assigned to the consulting tasks; ownership of the project’s work products; standard of care; insurance requirements; dispute processes; indemnification or “hold harmless” clauses; warranties; and provisions for the suspension or termination of consulting services.
Description of Services
Either in the body of the agreement, or as an attachment, the services to be provided by the consultant are defined. Unless the process used to complete the service is particularly essential to the work, the description of services will usually focus on the various work products, or “deliverables,” that the consultant will provide under the contract. For example, the description of services for an architectural services consulting contract will focus on the construction plans, design reports, and other deliverables that will be completed under the assignment. In other cases, consultants may provide services that result in few, if any, formal deliverables. For example, contracts for expert consultations or advisory services may have few defined deliverables.
Contracts define the terms of compensation, including the maximum amount of compensation, payment terms, and retainage (an amount withheld until final completion of the work). Typical compensation structures include payment of a defined amount, payable in a single (“lump sum”) amount or periodic progress payments. Other compensation options include periodic payments for work performed on an actual time and materials basis, usually up to a not-to-exceed dollar amount. Time and materials payments can be based on a defined labor and expenses rate schedule, or can be actual costs multiplied by a fixed amount for overhead and profit.
There are numerous sources of standard agreements, and either party can initiate the form of the contract to begin negotiations. All written agreements, including standardized forms, need to be carefully reviewed by both parties to ensure that the contract adequately defines the mutual understanding of the parties, and that each party can meet the requirements of the contract. Insurance requirements and limitations of liability are two areas that merit close scrutiny in any agreement.
This article is informational only, and should not be interpreted as legal advice. Consult competent legal counsel for advice about any particular issue or problem.