After knowing how to get into consulting, you know that consulting agreements differ tremendously in scope. They vary from simple to incredibly complex contracts depending on the nature of the project they are covering. Although deals and contracts could be sealed just by having a handshake, it is a wise decision for every consultant to ensure a simple consulting agreement letter is in place and signed before starting any project. Contracts are essential in protecting freelancers and consultants as well as their clients against unforeseen circumstances or in the case when agreements go awry.
If you are a consultant, drafting agreements is one of the everyday paperwork you'd handle as a part of your business flow. It is crucial in project execution, record purposes, and protecting you from unwarranted liabilities. If you are new to simple consulting agreement letter drafting, this article gives a guide on the essential contents of a professional consulting agreement.
Here are the essentials of a simple consulting agreement letter - a competent consulting agreement includes the following details:
1. List the parties involved in the simple consulting agreement letter
The parties (consultant and customer) information must be listed on every simple consulting agreement letter to identify them. Relevant information in this section includes name, email address contact addresses, phone numbers, and websites.
2. Include scope of service in the simple consulting agreement letter
Next is the description of the project and the goal/objective to be achieved. Ensure you display professionalism and a good understanding of what the job entails as a consultant.
3. Mention services and responsibility in the simple consulting agreement letter
The next information is the services you will be offering and your deliverable clearly outlined in the simple consulting agreement letter. Ensure you state all your responsibilities and that of your client towards achieving the objective of your relationship. Doing this will exonerate you if your client fails or delay in providing the materials needed for the job.
4. Include service fees and terms of the agreement in the simple consulting agreement letter
Knowing how to bill for consulting services is important so you won't undercharge or overcharge your clients. Ensure you state your fees and break it down to the sub-tasks if need be for clarity. Also, state the expected time you'd be sending an invoice, the due date of payment, and other terms that govern the consulting service relationship.
5. Cover taxes and expenses in the simple consulting agreement letter
Tax responsibility should be discussed before adding to the financial burden of the client. Unless the consultant has provided relevant information with a notice, a clause should be added for the client to be responsible for remitting sales tax on goods and services to the appropriate taxation body.
6. Mention project duration in the simple consulting agreement letter
The time allocated to complete the project should be stated on the agreement, likewise specific times for milestone completion.
7. Include details of licenses & permits needed in the simple consulting agreement letter
As a consultant, you should have a clause in your simple consulting agreement letter that gives you the right to necessary license and permits plus approvals that are required to comply with the laws, codes, and regulations relating to the service you will be rendering to the benefit of your client.
8. Mention insurance and indemnity in the simple consulting agreement letter
Consultants should obtain and hold in good standing insurance policies that protect their clients from the liability that may arise from a consultant’s delivery of the service under the simple consulting agreement letter. Contractual guarantees including but not limited to employment insurance, workers' compensation, and property damage insurance.
Besides, you should include in the agreement a clause that indemnifies and holds you as a consultant harmless from all claims of loss, expenses, or damage that clients might have in the past or future as a result of the service delivery by the consultant. This also applies to the directors, employers, or workers that a consultant employs in carrying out the service agreed upon by parties.
9. Address conflict resolution in the simple consulting agreement letter
There should be a section that states the method for resolving conflict, if any, results from the business relationship.
10. How to create an IT consulting agreement template
An opportunity to understand issues in the information technology foundation and assess possible feedback is a rewarding task. However, similar to any other consultant, you may be wondering about the payment and reward process that will compensate for your hard work and time.
You may already be processing a consulting agreement in your mind to improve your relationship with the information technology customer.
- As a freelance professional, what can you do to make a valuable IT consulting agreement?
- What if you have never had a chance to create an agreement before?
- What should you include in this agreement?
If questions like these are disturbing you, then it’s time to find a template and customize it according to the specific requirements of your project. Let’s evaluate a few things that should be kept in mind while structuring an IT consulting agreement.
10.1. Include your service description
The service description is the first component that should be incorporated in your IT consulting agreement. The services offered may be related to IT consulting. However, a clear and concise breakdown helps in forming succinct terms of service. As a result, it becomes necessary to include short-term services, project-based services, and ongoing services.
When this segmentation is incompetent, you can face problematic circumstances in the future. The customer can overwhelm you with additional work, which is not clearly defined under the agreement.
10.2. Terms of payment
Including the terms of payment or compensation ratio goes without saying. However, defining the terms of payment in a detailed format eliminates future challenges.
Some consultants prefer offering an aggregated sum for a certain task, and others prefer offering a fragmented view of constituent parts of the payment. In both cases, it is best to include the details of a few factors:
- How will the payment be released? The mode of payment.
- When should the payment be released? A time period during which the payment should be dispatched.
- Under what circumstances should upfront payment be dispatched?
When the customer or the consultant wants to terminate the project, what should be the terms of termination? It is possible for the customer to terminate the contract when the project is still in its crucial stages. It is also possible for you to terminate the IT consulting agreement due to multiple reasons.
Defining the terms of terminations will allow the company and consultant to mitigate risks. The company can dispatch pending payments immediately, and the consultant can dispatch promised work within the time limit. It saves the interests of both parties without creating a legal problem.
10.4. Ownership rights
Both parties - consultants and companies, may share confidential and sensitive information during the agreement lifetime. Who should own the information?
A special NDA (non-disclosure agreement) based on the requirements of the project should be signed to keep sensitive information safe. You should also include under what circumstances the delivered work remains in the ownership of the consultant.
An IT consulting agreement offers protection in case you wish to seek legal help and advice from an authorized organization. However, in reality, legal actions are hectic and time-consuming. The contract, therefore, serves as a way of establishing customer’s and consultant’s expectations from the project. It helps in protecting the interests and property of both consultant and customer.
Maintaining healthy terms with the customer creates the foundation for a successful relationship. Hence, it is suggested to work with the client to create an IT consulting agreement that is beneficial for the interests of both parties.