10 key terms to include in your consultancy agreement

Self-employed? You’re not alone; according to the Office for National Statistics, there were more than 5 million self-employed people in the UK by the end of 2019.

Self-employed? You’re not alone; according to the Office for National Statistics, there were more than 5 million self-employed people in the UK by the end of 2019. From the ability to choose when and how your work is done to the freedom to work for multiple clients, going freelance can be an appealing choice.

However, it’s important to bear in mind that if you’re working on a self-employed basis, you won’t be protected by employment law in the same way that employees and casual workers are. This means that it’s really important to put in place proper written contracts with your clients.

Providing your clients with a formal consultancy agreement will not only make sure you’re both on the same page as to what services will be provided and at what cost, but you can also include important protections for your business. To get you started, we’ve summed up 10 key terms to include in your consultancy agreement, whether you provide your services as an individual or through a company.

  • The names of you and your client

It might sound obvious, but it’s important to make sure your agreement uses the correct party names (i.e. your client’s registered company name, not simply their trading name). This will help to avoid any disagreements later about who’s carrying out the services and who’s paying.

  • What services you’ll be providing

Your contract should make it really clear exactly what services you’ll be providing and how (e.g. how long it will take you, a timeframe for completion and what standard of service has been agreed). This will prevent any disputes occurring later down the line. You should also set out any obligations your client is under (e.g. to provide you with information you need).

  • The fee for the services

Make sure your contract clearly specifies how your fee for the services will be calculated. For example, will you charge a fixed rate (e.g. by the hour) or will the fee be set in advance? This should include how any out-of-pocket expenses will be dealt with; who ends up paying for these will be a matter of negotiation between you and your client.

It’s also really important that you make it clear how you will charge for any additional work required that’s outside the scope of the services. If you don’t intend for it to be included in the original fee, then to avoid getting caught out later, make sure you specify how it will be calculated.

  • Your payment terms

Late payments can be detrimental to your business’s cash flow, so your payment terms must be really clear (e.g. how you will invoice and when and how payment should be made). It’s a good idea to also include a clause making it clear that your client can’t deduct any sums that you might owe to them from your fee.

  • Provisions about any equipment When you’re self-employed, in most cases it will be appropriate for you to provide your own equipment and materials, but it’s still important to make this clear in the contract.

  • Terms limiting your liability

This is important because if you don’t include terms to exclude or limit your liability to your client if you breach the contract or are negligent in how you perform your services, your liability won’t be capped! Specific rules apply to how these clauses can be used. It’s also important to include a clause giving you the opportunity to rectify any breaches before your client can claim damages from you; this is likely to be cheaper for you in the long run.

  • An indemnity from your client

You might want to consider asking your client for indemnities in your contract, which would protect you against any losses or liabilities in certain circumstances (e.g. if they provide you with information that causes you to infringe someone else’s IP rights).

  • Terms to protect your confidential information

You’ll likely want to make sure your client keeps your confidential information confidential, so your contract should contain a confidentiality clause. These normally continue after the contract comes to an end, providing you with additional protection.

  • Terms to protect your IP When you’re working as a freelancer or contractor, generally any IP you create will belong to you, but it’s a good idea to make this clear in your agreement. Bear in mind that if owning the IP is important to your client, they may want to negotiate this with you.

  • Compliance with data protection rules If you and your client will be sharing any personal data, it’s a good idea to include clauses in your contract confirming that you’ll both abide by your data protection obligations. If you’ll be processing any personal data on behalf of your client, you’ll also need to include specific data processing terms.

If you’re looking to draft a consultancy agreement, Sparqa Legal has templates you can customise to your business whether you’re providing your services as an individual freelancer or through a company structure.

The content in this article is up-to-date at the date of publishing. The information provided is for information purposes only, and is not for the purpose of providing legal advice. ©Sparqa Limited 2021. All rights reserved.

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