Businesses hire consultants when they need external expertise. When engaging a consultant, it is essential to have a clear agreement that outlines the specific scope and responsibilities of the role.

Any company looking to take a strategic approach to growth can benefit from hiring an experienced consultant. Engaging third-party experts is common across many industries, but it must be clearly outlined in a consultancy agreement.

Consultancy agreement defines the scope and extent of the work to be performed.

Formalising the relationship between the company and the consultant, whether they are a private individual or a consultancy company, protects both sides.

What is a Consultancy Agreement?

A consultancy agreement is a contract that exists between a consultant and a company. The agreement is legally binding and can be thought of as a type of employment contract when a company is hiring the skills and expertise of a third-party.

Having a consultancy agreement in place prior to any work commencing is important for a number of reasons.

Why Do You Need a Consultancy Agreement?

Having an agreement in place is something that can be easy to overlook, particularly when a business is in a startup or expansion phase, but it should always be in place.

There are a range of different ways that an agreement will help protect the business:

• Avoid legal issues, such as equity claims and IP claims, that may arise in the future 
• Create a scope of work and set clear boundaries for the working partnership 
• Include terms of termination, deliverables, and timelines for the work to be completed

Consultants will also want an agreement in place for a number of reasons:

• Consultancy agreements cover the size of the remuneration and method of payment
• Protection against termination on unreasonable grounds 
• Making sure that the expectations are clearly defined

Drafting these types of agreements for the first time can feel like a daunting prospect, but with the right guidance, it can become a relatively straightforward process.

What Should a Consultancy Agreement Include?

Having a comprehensive list of the key details that need to be included can shine a light on the precise form the agreement needs to take. All agreements should include:

• The name and address of the business and the consultant 
• A clear definition of the scope of work that is going to be undertaken 
• How much the consultant will be paid, by what method, and the timeline 
• A confidentiality clause and NDA that prevents information being shared 
• A limitation of liability — this is where the company is legally protected from any issues that occur as a result of the consultant’s work

A limitation of liability is particularly important as it protects the business from a series of potential legal issues that can arise in the future. Because the consultancy can be highly complex and associated with many areas of the business, having a limitation of liability is always good practice.

Now that we have covered the key points that need to be included, we can take a closer look at the drafting process.

💡Do you need an Employment Contract instead?

Drafting a Consultancy Agreement

Drafting a consultancy agreement contract does not have to be a time-consuming or stressful process.

Starting by defining specifically what you would like the consultant to do is the best approach and is something that may already be mapped out in an internal job description document. You should ensure to include:

• Key duties, deliverables and their timelines, and performance indicators 
• Project milestones, hours of work, and expected areas of focus 
• Any expenses, the payment terms, and the associated timeframes

Once the role has been comprehensively described, you can add the legal details highlighted in the previous section. Using a professional template service can help streamline this part and will ensure the agreement is legally sound.

Consultancy Agreement – Free Template

Below is a Consultancy Agreement Template that you can customise for your business needs.

CONSULTANCY AGREEMENT

This Agreement is made on [Date]

BETWEEN:
[Client's Name/Company Name], registered at [Client’s Address] (the "Client"); and
[Consultant's Name], residing at [Consultant’s Address] (the "Consultant").

Together referred to as the "Parties".

1. ENGAGEMENT

1.1 The Client engages the Consultant to provide [describe services] (the "Services").
1.2 The Consultant agrees to perform the Services with reasonable skill, care, and diligence.

2. TERM

2.1 This Agreement shall commence on [Start Date] and continue until [End Date], unless terminated earlier under Clause 8.

3. FEES & PAYMENT

3.1 The Client agrees to pay the Consultant [amount] per [hour/day/month/project], payable [payment terms, e.g., within 14 days of invoice].
3.2 Any expenses incurred must be pre-approved by the Client in writing.

4. INDEPENDENT CONTRACTOR

4.1 The Consultant is an independent contractor and not an employee of the Client.
4.2 The Consultant shall be responsible for their own taxes, insurance, and legal obligations.

5. CONFIDENTIALITY

5.1 The Consultant agrees to keep all confidential information of the Client secure and not disclose it to third parties without prior written consent.

6. INTELLECTUAL PROPERTY

6.1 Any work created by the Consultant for the Client shall be the exclusive property of the Client unless otherwise agreed in writing.

7. LIABILITY & INDEMNITY

7.1 The Consultant shall not be liable for any indirect, special, or consequential loss suffered by the Client.
7.2 The Client agrees to indemnify the Consultant against any claims arising from the Client’s use of the Services.

8. TERMINATION

8.1 Either Party may terminate this Agreement with [X days] written notice.
8.2 The Client may terminate the Agreement immediately if the Consultant breaches any term of this Agreement.

9. GOVERNING LAW

9.1 This Agreement shall be governed by and construed in accordance with the laws of [Country/State].
9.2 Any disputes shall be resolved through [mediation/arbitration/courts of jurisdiction].

10. GENERAL

10.1 This Agreement constitutes the entire agreement between the Parties and supersedes all prior discussions.
10.2 Any amendments must be made in writing and signed by both Parties.

Signed by:

Client Name & Signature: _______________ Date: _______________

Consultant Name & Signature: _______________ Date: _______________

Consultancy Agreement: Common Mistakes to Avoid

The worst mistake you'll want to avoid is not doing and signing any official agreement.

Companies who are undergoing rapid expansion and hiring third parties can overlook key details when drafting agreements:

• Using outdated personal information for the consultant 
• Omitting a limited liability section that would protect the company 
• Forgetting to include a comprehensive section on IP ownership

Using a consultancy agreement template combined with the services of a trusted legal professional will ensure that these sorts of costly issues never arise.

Hiring the services of a consultant is common practice when a business wants to benefit from the skills and experience they do not have in-house.

Our resource library offers further guidance on setting up the business and all the essential documents any company could need, including advisory agreements.

⚠️ Every reputable consultant will want to have an agreement in place before they start work. If an agreement cannot be made, searching for another consultant is always the best course of action.