A Consultancy Agreement is a document designed to regulate the relationship between a company and an independent consultant who is not an employee of the company. It is a legally binding contract that sets out key information about the work the consultant will do, how he or she will be rewarded, and what his or her obligations are to the company.
The knowledge and skills that a consultant can bring to your business are often invaluable to the success and growth of your business. For instance, the consultant may be in charge of bringing in new clients, contacting potential partners or investors, or providing administrative services.
A Consultancy Agreement contains clauses to cement the relationship between the consultant and the company. How much will the consultant be paid? How many hours will he or she work per week or per month? Will the consultant have access to any confidential information about the company that you may want to protect and how will you protect that intellectual property? If you want to end the relationship with the consultant, what is the process and should you provide any advance notice?
Hiring a consultant is usually less cumbersome and requires less commitment than hiring an employee. This is because being an employer carries a lot of legal responsibilities, and an employment contract for an employee reflects those responsibilities.
With a Consultancy Agreement, the relationship is simpler. You pay someone to do something for your company, but, beyond that, you are not creating any specific duty between you and the consultant. Nevertheless, whether someone should be considered as an employee or a consultant is not just determined by what the client or the individual wants; the determination is based on various objective factors that relate to the company's control of the consultant's work.
The consultant will remain independent from your business. He or she may even have other professional activities or provide consulting services to other companies, which is why this agreement is sometimes also called a Freelance Agreement.
A well-drafted Consultancy Agreement will set out the scope of the work that the consultant will provide, and protects the business by letting the consultant know the extent of his or her powers and responsibilities.
When drafting a Consultancy Agreement, it is important to focus on a number of key clauses, in particular: