All contracts, including the independent consultant agreement contract, must be in writing to be valid. Contrary to popular opinion, it’s possible to enforce oral contracts. However, the validity of oral contracts is harder to prove for the simple reason that it’s all about ‘he said, she said’. Consultant agreement contracts can also be put through the general rules of contract laws. One of these general rules states that a contract is legal when one party presents an offer while the other one accepts. Generally, contracts can only be valid if:
a) all the parties are in agreement about its content
b) all the parties agree to exchange something of value
All valid independent consultant agreement contracts have different components. These include Term and Termination, Contractor/Consultant Services, Ownership, Representations, Indemnification, and Confidential Information. There is also the Liability, Disclaimer of Warranty, Miscellaneous Provisions, and the Independent Contractor Status. The status section is crucial for many purposes. The IRS need the information appearing here to determine whether one is an employee or a professional independent consultant.
The status on this component of the independent consultant agreement contract must declare in no uncertain terms that one of the parties involved will work as an independent contractor. In fact, this part of the agreement contract must specifically state that there will be no employer-employee relationship during the course of the project. Also, this part indicates that the relationship pursued here will not be that of principal and agent. This part of the agreement contract discourages creating a joint venture or partnership too.
Experienced consultants often take a keen interest in this component. The status they declare on this part states that the consultants will not operate as agents for or on behalf of the client. Apart from that, it states categorically that the consultants will not be representing the client (which could be a person, business, or organization) anywhere during or after the project is completed. What many may not appreciate is that the client also enjoys the protection of this part of the contract. The protection is in the declaration that the consultant will not bind the client at all.
The law states that when paying an independent consultant, there should be:
a) no withholding of wages
b) no employment taxes
c) no unemployment insurance
d) no workers’ compensation
e) no liability for pensions
Therefore, the independent consultant status’ section is a crucial part of the contract for many reasons. Without it, issues such as workers’ compensation, insurance, retirement and any other benefit would be left unattended. The resulting confusion would cause plenty of mayhem for all parties involved in signing the contract. The wordings on this section eliminate any ambiguity that could arise and create more confusion. It eliminates any doubt that might linger as to the actual status of the consultant hired to do the work.
This part of the contract helps clients to appreciate that independent consultants are free from:
§ any form of supervision
§ any form of direction
§ any form of control while performing their duties
Therefore, independent consultants should study this part of the contract closely. They should understand it. This part of the contract needs to be in a language that does not leave any room for confusion or ambiguity. It should state everything in clear language. The independent consultant status is just as important as any other part of the contract. It states clearly the role the consultant will play. The component also distinguishes the consultant from any other employee that works for the client.