Often a consultant or a consultancy firm will be engaged to assist in bringing a strategic project to fruition, and this may be for a discrete assignment or a longer-term arrangement.
‘The very specific nature of such a project and its strategic importance means that it is important to have a bespoke consultancy agreement,’ according to Mark Glenister, JPP Law. ‘This is a contract setting out the terms and conditions which govern the supply of services to your company by any external consultant.’
A consultant may be a company or an individual, and the distinction can be important if you are seeking to secure the skillset of a particular person rather than their colleague, or if you are contracting with an entity which can protect individuals from exposure to liability.
Typical terms
Before engaging either a company or an individual on a consultancy basis it is vital to ensure that you have negotiated precise terms to provide clarity for both parties. Typical terms will include:
- the expected outcome;
- the obligations of the consultant(s);
- project duration;
- what happens if they become ill or incapacitated;
- confidentiality and data protection;
- responsibilities when the contract comes to an end; and
- the payment of expenses and fees.
A consultant or a consultancy is a separate entity and individuals concerned are not employees of your company. As the separation is intentional by virtue of the agreement to act on a consultancy basis, it should be spelled out that your agreement to work collaboratively does not create a partnership, accrue any workers’ or employee rights, or any kind of agency agreement.
Similarly, you need to ensure that your consultant is not able to bind your organisation to legal agreements, for example, or be able to admit liability on your behalf.
Intellectual property and confidentiality
The consultant is likely to have access to commercially-sensitive information, and so you should ensure that you agree how your customer data, business know-how or trade secrets and other intellectual property will be protected, how it will be dealt with by the consultant, and what happens when the contract ends.
A key point for negotiation relates to the intellectual property rights which may accrue during the currency of the consultancy agreement, and what happens once that agreement ends.
Depending on the nature of the work that the consultant does for your company, it may be that the intellectual property that they generate during the currency of the agreement is particularly valuable, or could become so in the future. Make sure that you are both clear on who owns what.
Another key consideration is whether it is necessary to restrict the consultant’s ability to work with a competitor after the consultancy agreement ends. This is an area in which it is vital to seek specialist advice as clauses will not stand up to scrutiny in court unless they are carefully drafted.
Remedies for breaches
When scoping a consultancy assignment, it is natural to focus on the benefits of working together but setting out what happens if things should go wrong is also invaluable.
Specific remedies may be dictated by the nature of your business, for example, a minor breach in a long term arrangement may not require anything other than acknowledgment. Meanwhile a failure to complete a specific project by the specified deadline could attract damages, but a serious breach such as a failure to keep matters confidential for a sensitive project may demand immediate termination of the agreement followed by a claim for damages.
It is worth seeking legal advice at an early stage before you finalise negotiations with your proposed consultant to ensure that you obtain the most advantageous terms.
In some instances damages will be an adequate remedy to rectify what has gone wrong, whilst in others you may need to rely on alternative remedies such as specific performance. Some breaches may be so serious that only termination followed by a claim for substantial damages will suffice.
