Business Setup

BookAppointment

Prefer to talk to a business advisor first?

Book a call back

Tax & Compliance

BookAppointment

Prefer to talk to a business advisor first?

Book a call back

Trademark & IP

BookAppointment

Prefer to talk to a business advisor first?

Book a call back

Documentation

BookAppointment

Prefer to talk to a business advisor first?

Book a call back

Others

BookAppointment

Prefer to talk to a business advisor first?

Book a call back
user-login
Consult an Expert

Consult an Expert

Business Setup

Business Setup

Tax & Compliance

Tax & Compliance

Trademark & IP

Trademark & IP

Documentation

Documentation

Others

Others

More

More

Login

Professional tax is mandatory in your state! Avoid penalties. Apply Now

Ellipse4

Consultancy Agreement - An Overview

A consultancy agreement is a legal document that is used anytime a company hires an outside consultancy firm or consultant. The company may decide to hire these consultants on a temporary basis as part of a certain programme or project. Rather than hiring such people for extended periods of time, the company seeks external experts with in-depth understanding in that field. When the nature of the employment is contractual, it is always preferable to sign a consultancy service agreement. It serves as legal proof that the company and the agreement reached based on some basic criteria. Doing so will prevent any mishaps from taking place.

When Is a Consultancy Agreement Required?

A consultancy agreement for services becomes necessary whenever a company or firm employs consultants or any project.

  • Firms or companies might take up work in a domain or field that is not very familiar to them
  • In such cases, rather than employing many people who are experts in that field, companies prefer to take the help of a consultancy agency
  • Such consultants have unique and focused knowledge in an area and can help the firm for short-term projects
  • Not only does this help the company cut long-term costs, but it also enables them to work on more varied projects
  • In such cases, to ensure that the best interests of both parties are met, they may enter into a agreement
  • Such a consultancy service agreement for services provides that there is no miscommunication or cheating from either side, as it binds both parties via a legal document.

Who Is Involved in a Consultancy Agreement?

The consultancy agreement is primarily made between the company and the consultant or consultancy firm in question.

  • The consultancy service agreement concerns itself with the work being done, length of employment, payment and salary concerns, and also other terms and conditions
  • Since the consultant agreement for services contains information regarding the task at hand, it involves both the employer and the consultant
  • In many ways, a consultancy service agreement is a type of service agreement.

Elements of a Consultancy Agreement

Here's a look at the significant elements of a consultancy agreement:

  • Scope of work: The consultancy service agreement for services must specify all the duties, obligations, responsibilities, and functions that the consultant needs to perform. While the method of his working might not be defined, everything expected of the consultant must be mentioned. Therefore, the employer, in most cases, gives the consultant the freedom to work as per their comfort.
  • Term: The term sub-clause mentions a period within which the company will require services from the consultant. The term also helps the consultant know just how long they are expected to contribute to a project. Sometimes, it is quantified in years or in project completion time.
  • Payment terms: The payment terms usually include all the details regarding compensation that the consultant will receive from the company. It will also specify how the company will pay the consultant, which consultancy agreement payment method they will use, and whether the consultant will receive extra allowances.
  • Confidentiality: In some instances, the work that the company has for the consultation will be secretive. Therefore, they will add a confidentiality clause in the agreement to make sure that all the data they share remains private. Such a provision ensures that the consultant will not make confidential data public, thereby causing harm to the company.
  • Termination: The termination clause explains all the situations under which the company can terminate the consultant's employment. It will also mention how much notice will be given and even under what circumstances the consultant can leave the job mid-way.
  • Noncompetition: Such a section details how long the consultant must wait before engaging in such services with other competitors of the company. It specifies that during a stipulated term, the consultant will not engage with competing companies in any way.
  • Non Solicitation: The non-solicitation clause ensures that the consultant does not attempt to solicit any customers from the parent company after the end of the project. Furthermore consultancy agreement, when extended to employees, the clause ensures that the consultant will not in any way, recruit or induce, any of the company's employees.
  • Indemnification: Such a clause protects the consultant from lawsuits of any kind due to the client's business.
consultancy agreement

Benefits of a Consultancy Agreement

  • Details the activities that the consultant agreement is contractually and legally responsible for
  • Serves in protecting the interests of both the company and the consultant in question
  • Covers all the details regarding the employment and project undertaken
  • Acts as a legal document in case of any disputes between the company and the consultant
  • Reduces the risk of litigation.

What to Consider Before Signing a Business Consultancy Agreement?

  • Make sure you go through the consultancy service agreement for services and rectify any mistakes and clarify all your doubts. Have your lawyer go through the contract and explain every clause to you so that you understand it completely. You must make sure that the consultancy service agreement is well interpreted so that both you and the company share the same expectations concerning your work
  • Do not just assume that the company will be upset or annoyed if you raise concerns over individual sections or clauses in the business consultancy agreement. Such fear should not stop you from speaking out your mind regarding things you are not comfortable within the contract. All companies know how negotiations work and will not have issues going over the clauses with you if you ask for help
  • Use the business consultancy service agreement to define your relationship with the firm, and so make sure you get things right. Not only will this prevent any disputes in the future, but it will also make the process a lot smoother and fruitful for both
  • In case you work for a consultancy firm, make sure the business consultancy service agreement does not violate any of your employer's policies. Since most institutions have policies regarding conflict of interest or commitment, make sure your contract does not put any of those policies under fire
  • Also, go through the confidentiality clause and make sure you understand what is expected of you. Similarly, make sure the financial consultancy agreement protects your rights and Internet Privacy and data concerns
  • Get help from a lawyer in case you don't understand all the terms in the contract. Click here to get lawyer services. It is always better to clear things as they arise, rather than mess up in the end. Furthermore, there might be issues that you don't even understand in the financial consultancy service agreement that an experienced lawyer can raise. This, in turn, will help you protect your best interests efficiently.

How to Use This Consultancy Agreement?

  • This agreement may be utilised by either a client intending to hire a consultant for consulting services or a consultant seeking to work with a client
  • You can establish a client-consultant relationship using this agreement. The services agreement may be utilised for additional services. The employment agreement may be utilised to establish an employer-employee connection
  • This agreement will contain information on the consultant and client, including, if applicable, their offices' addresses
  • A thorough Scope of Work (SoW) can be included by the person filling up this Agreement. The SoW details the services for which the parties have entered into this agreement. To prevent any disagreements, it is preferable to specify the SoW in great detail with all relevant details
  • The method and duration of payment, as well as how the consultation fee will be determined (hourly, daily, monthly, etc.), are all outlined in the payment clause
  • According to the needs, the parties may put a confidential clause or a non-disclosure clause in this agreement. This serves to safeguard the client's private information. A second Non-disclosure agreement may be signed by the parties if they wish to establish more detailed conditions about the confidentiality duty (such as what information should and should not be treated as confidential, how long it should be kept that way, etc.)
  • The parties may agree on a non-compete clause, which would prohibit the consultant from going up against the client for a specified amount of time in a particular area. This agreement allows for the addition of a non-solicitation clause, which forbids the consultant from approaching the client's clients or staff with offers of employment. A separate non-compete agreement might be used if the client requires a non-competition and non-solicitation agreement that is exclusive
  • The parties may also incorporate the arbitration clause in this agreement. Both parties will voluntarily select an impartial third party (‘Arbitrator’) to hear any disagreements between the parties under the arbitration. After hearing both sides' arguments, the arbitrator will decide on the basis of merit. The decision of the arbitrator shall be final and binding upon the parties
  • Both the consultant and the client must properly sign this agreement on the designated stamp paper in accordance with the Stamp Acts and regulations of the relevant states for it to be considered a binding contract.

Various Important Clauses of the Consultancy Agreement

  • Scope of Services: Given that it will set the boundaries for every other clause, this is likely the most important element of the agreement. It must be clear what falls under the scope of the consultant's obligations under the agreement and what does not. If the services cover a wide range of topics, it is also appropriate to include an annexure with the agreement that explains the services in more detail.
  • Defining the Relation: It is advisable to define the relationship between the client and the consultant explicitly, so a clause stating that the parties' relationship is distinct from that of principal-agent or master-servant (these relationships subject the former to liability for the latter's actions) shall be drafted. As a result, the consultant shall be considered an independent service provider and shall be solely responsible for its own actions.
  • Governing Laws and Jurisdiction: Due to the extensive virtual reach of consulting firms, clients frequently hire service providers from other states or even foreign countries. For this reason, it is essential to succinctly outline the parties' intended course of action in the event of a dispute, such as: a. 15 days notice to correct; b. Mediation; c. Arbitration (Seat and Venue); and d. Applicable laws and Jurisdiction.
  • Point of Contact/Authorised Representative: For the sake of clarity, a phrase that details the name and title of the permitted client company representative to whom the consultant shall make recommendations and correspond in compliance may be added.
  • Payment:This provision must outline the method of payment, including whether it will be a lump sum or a series of payments based on invoices generated periodically by the consultant (the latter is typically preferred by all clients). Some requirements are as follows:
  • The consultant will submit invoices and other information
  • The customer will have a set period of time, say 30 days, to make payment
  • Any money unintentionally paid to the consultant must be reimbursed
  • The information needed to pay the consultant's account.
  • Surviving Clauses: In order to protect the client company's interests, it is crucial to include surviving terms that will remain in effect even after the agreement is ended because the consultant handles a lot of sensitive information about the client's company. Examples of such clauses are:
  • Confidentiality: This provision will state that the consultant shall not disclose any sensitive or proprietary information of the client, as well as a number of situations in which the Consultant shall not be subject to the secrecy
  • Non-Solicitation: This clause must state that the consultant is not allowed to approach any of the client's clients or employees
  • Obligations of the Consultants: Some common obligations of a consultant are:
  • The consultant must provide services using the highest professional standards and methodologies, and they must also refrain from engaging in any unethical, illegal, or forceful behaviour
  • Deliverables must be made by the consultant in accordance with the agreement's service scope
  • No further commission is to be received or demanded by the consultant or its employees beyond the payment in line with the agreement
  • To keep accurate and organised books and records for the services rendered under this agreement in compliance with GAAP, Indian accounting standards, and other generally recognised accounting principles
  • To grant access to the client representative so they can confirm and check out the consultant's services.
  • Obligations of Clients: Some common obligations of a consultant are:
  • Clearance: In order for the consultant to provide the most accurate and useful advice, the client ensures that the consultant or its personnel has quick access to various important data (depending on the type of consulting service) or access to corporate facilities for inspection.
  • Payment: Must adhere to the agreement's payment schedule and make prompt payment of all obligations.
  • Ownership: It is vital to understand that whatever the consultant produces for the purpose of providing services under the agreement belongs exclusively to the client, and that following the termination of the agreement, the client will get all deliverables produced by the consultant. In order for the client to make an informed decision based on the deliverables offered by the consultant, the consultant produces a lot of data, reports, or documents (deliverables).
  • Operation of the Agreement: Depending on the complexity of the other agreements, this clause may also be utilised in them. Even while an agreement must be as detailed as possible, occasionally the services provided may be of a nature that precludes the consideration of or planning for every conceivable scenario. Therefore, this clause is inserted to handle the possibility of anything unforeseen and the parties agree to resolve any such concerns in a fair manner. This is done in order to address any potential grey areas.

Remedy for Breach of Agreement by the Consultant

  • Liquidated Damages and Penalties: This clause is advantageous to the consultant if the liability is expressly constrained, such as when it states that the liability shall not exceed the total amount of payments specified in the agreement. For instance, if the client was sued and the consultant was found to have materially violated the terms and conditions incorporated into the agreement, causing the client to suffer any kind of monetary loss, the consultant would benefit from this clause. There are a few common ways to enforce sanctions, including:
  • The client may withhold 5% of each invoice raised by the consultant as a security; the client may accumulate this security, which will be released upon termination of the agreement without a breach by the consultant. The client can refuse to deliver the security amount withheld if the consultant commits any breach.
  • In the case that the consultant delays in delivering deliverables, the consultant may be fined 0.001% of the agreement's value per day.
  • Suspension of Agreement: When the consultant has committed a breach that can be remedied, the client may send the client a notice of suspension specifying the breach and the deadline for the consultant's remediation.
  • Termination of Agreement: This clause specifies the circumstances that give rise to the client's right to cancel the contract, the circumstances that give rise to the consultant's right to terminate the contract, and the consequences of each termination in turn.

Why Vakilsearch?

  • We execute legal work for over 1000 companies every month, by leveraging our tech capabilities, and the expertise of our team of legal professionals
  • We ensure a seamless interactive process with the government
  • Your original price includes two rounds of iterations
  • Come on board and experience the ease and convenience with us
  • If you need any changes done to the agreement, our lawyers will do the needful and send it across to you for your view once again.

FAQs on Consultancy Agreement

Consultants are the go-to people when it comes to advising and expert opinion. A manager can turn to a consultant when they require or need help regarding specific issues. Consultants work as independent professionals who have in-depth knowledge in a particular field. As managers are expected to have experience in various areas, they might not have a lot of understanding when it comes to niche topics. In such instances, they can turn to a consultant who specializes in that particular field or area.
Many freelancers and consultants end up doing more work than necessary as they want to make the best first impression. Make sure you set the tone early on so that your employers understand your value and what you expect from them. Protect yourself by putting everything in writing and signing a consultant agreement for services. Understand that anyone worth doing business with will have no issues signing a legal document.
Paying a little extra in the beginning to have a lawyer look over the consultant agreement is a worthwhile investment in the long term.
While all types of companies require consulting services, from time to time, certain areas are in demand quite often. Here's a look at the broad categories of consulting and which ones are in need.
Most in-demand categories of consultants
  • Operations consultants
  • Financial consultants
  • Human resources consultants
  • Risk and compliance consultants
  • Strategy consultants
Specific consulting jobs require no formal training as such, as they deal more with strategizing and planning. For instance, social media consulting isn't something that you can have a license in, but various factors help make you qualified to pick up such a role. Similarly, certain other types of consulting such as education, taxes, and real-estate, require certifications and licenses.
Most employers look for consultants who at least have a bachelor's degree in accounting, operations, HR, business, finance, or management. The coursework that they studied must have statistics, management disciplines, communications, accounting, leadership, and ethics.
Another essential qualification that a consultant requires is socialization and work experience. Most employers need a minimum of two years worth of consulting expertise to take someone on.
Get me more details
Select City*
Select Language*

Easy monthly EMI options available

No Spam. No Sharing. 100% Confidentiality.

Other Agreement Pages