Advice to consultants on getting the contract right

One of the consequences we have seen as a result of the current recession is a rise in the number of people who have come out of employment and set up as independent consultants in their chosen field. You may be one of them. If so, then you will also have had a whole range of issues to deal with from setting up an office and your online and social networking presence, opening up a business account and possibly a company, to marketing your new business to bring in those much needed clients.

Amongst all the many issues that demand your attention, what you may not have considered in detail is how you will contract with your clients when a deal is finally agreed. You will have covered the key issues of what you will be doing for the client, the price and possibly the timescale for delivery, but do you get this agreed in writing, or is it based on a verbal agreement in discussions? If nothing is written down, there is then the potential for recollections to vary, particularly if one party finds that the project is not turning out as anticipated.

You may have exchanged emails, but are all the relevant details clearly set out? Has the client clearly accepted your terms and is that acceptance from someone in the client organisation who has the necessary authority to confirm the contract with you? I would recommend that you give some thought to setting out your terms in writing and, once agreed, getting the agreement signed off by someone with the appropriate level of authority in your client’s organisation.

The main issues which I would recommend you cover in your agreement will include:

• A clear and comprehensive description of the service you will be providing. Don’t leave any room for ambiguity as to what you will be doing. Add any clarifications needed to indicate what is not included. 
  
• How your fee will be calculated. Is it a fixed fee or based on time and materials? Are any expenses payable in addition? Is it exclusive of VAT? 
  
• Your payment terms. Will any deposit be required or is the whole fee payable on completion? In a longer term projects, indicate if payments are monthly or whether there are any stage payments linked to particular parts of the project being completed. State when you expect to be paid following delivery of your invoice. 
  
• Ownership of any intellectual property. If the project includes the creation of any intellectual property, the ownership of that intellectual property and any rights to use it should be clearly specified as this is a common area for misunderstandings to arise. 
  
• Liability and insurance. You will want to put some reasonable limitation on any liability you incur for any failure to perform as agreed, so far as the law allows. Where you are insured for a particular liability you will no doubt want to link your limitation to that insurance. 
  
• Subcontracting. If you will be subcontracting out any part of the project it is as well to make this clear. You should also have a corresponding back to back agreement with your subcontractor to make sure that you will be able to deliver the whole project to your client.

There will be other issues specific to your sector which you will want to address, but the above points give you an indication of some of the areas to be addressed. Once the agreement is signed, you can proceed with the project safe in the knowledge that you are working within clearly defined parameters. If there should be any query as to whether you are delivering the agreed consultancy service you can refer back to your written agreement. If there is room for doubt, you might end up with an unhappy client who might not be willing to pay you in full or at all nor recommend you to anyone else.

For assistance in drawing up contracts for use in your business call Sue Mann on 0845 003 5639.

Sue Mann
Commercial Solicitor