What is a Consulting Agreement?

Consultants are a specialized type of independent contractor that work with clients to provide advice and achieve goals. Like other independent contractors, consultants are not full-time employees. Working with and paying them requires a different kind of legal documentation. This document is called a consulting agreement.

This is everything you need to know about consulting agreements, including why they’re necessary, how they work, and what yours should include.

This content is for general educational purposes only and is not intended, and should not be considered, legal advice.

What is a consulting agreement?

A consulting agreement is a formal contract agreement created when a client requests services from a consultant. Consultants are considered a type of independent contractor, and so consulting agreements are a type of independent contractor agreement. 

Consulting agreements spell out the exact terms of the agreement between the consultant and their client, specifying the type and quality of services the consultant will perform for the client, for how long they will perform these services, and how they will be compensated. 

By creating a consulting agreement before consultation begins, both parties will understand what is expected of them and what will happen if those expectations are not met. This helps the consultation process go as smoothly as possible and creates an official record of the relationship for future legal and accounting reference.

The specifics of consulting agreements can vary widely depending on the nature of the consultative relationship, but they all follow the same basic format. When you know what to include in your consulting agreements, it’s simple to create a template and speed up the process for future agreements.

What is the difference between a consulting agreement and an independent contractor agreement?

Though consultants can be considered a type of independent contractor, their relationship with their clients is different from a standard contractor’s. 

When you hire a contractor, they are responsible for completing a specific, set task or project within a defined timeframe. When you hire a consultant, on the other hand, you are likely interested in receiving their consultative support over a longer period of time, or even on an indefinite, ongoing basis. 

While contractors complete set tasks, consultants help you achieve larger goals. For example, a software developer may hire a contractor to help them design their latest application. Meanwhile, they may hire a consultant to test their applications and identify places where the user experience could be improved.

With these differences in mind, it’s easy to see the contrasts. When you define the terms of the agreement with an independent contractor, you would specify the scope of the task you need completed and provide a set time frame for its completion. Whereas with a consulting agreement you would focus on the broader goals of the consultation. You might specify certain Key Performance Indicators the consultant’s advice would help you achieve, such as increased sales or user reviews, and indicate when progress toward these goals would be reviewed.  

What should be included in a consulting agreement?

Your consulting agreements should include the following sections:

• Identifying particulars: The names and contact information of all parties involved.

• Clarification of independent contractor status: The contract should explicitly state that the consultant will be considered a contractor and not a full-fledged employee.

• Scope of work: A detailed outline of the type of support you’d like to receive from the consultant. This should include a description of any deliverables the consultant will be expected to produce, any key performance indicators they will be expected to achieve, and how their performance will be evaluated over time.

• Duration of agreement: An indication of how long the agreement will last or, if the consultation period is indefinite, when it will be reviewed for renewal.

• Confidentiality agreement: A definition of what the consultant can and cannot disclose outside of your relationship and the consequences for breaching confidentiality. 

• Restrictive covenants: Any necessary clauses restricting what the consultant can do while under the terms of the agreement (could include a non-compete clause, for example)

• Termination terms: An enumeration of what will constitute cause for termination (failure to meet goals, confidentiality breach, etc.) and an establishment of the protocol the client must follow when terminating the agreement (timeframe for written notice of termination, consequences of termination, etc.)

• Compensation: Define how the consultant will be compensated, including how much, when, and how frequently. 

• Ownership of resulting property: Clarify who will own any IP that stems from the consultant’s work and how the consultant will be able to use it. 

• Dispute resolution policy: A plan for resolving disputes that may arise between the client and consultant during the consultation term.

What are some different types of consulting agreements? 

Consulting agreements vary depending on the kind of work the consultant will perform:

• Contract to hire: Sometimes, businesses will bring on potential employees as consultants before hiring them full-time. This consulting agreement could even include a framework for full-time hiring, such as milestones the consultant would have to achieve within a certain timeframe.

• Project management consulting: A client brings in a consultant to oversee a certain project and ensure it hits goals. 

• Objective-based consulting: A client brings in a consultant to work with their workforce or company until they achieve a performance-based milestone. 

• Outside expert consulting: A client brings in a consultant to benefit from expertise they don’t have in-house. 

• Continuous contracting: A client could also contract a consultant for an indefinite period of time. These agreements should include terms for reviewing the consultant’s performance at pre-specified intervals.

Create and store your consulting agreements with ease

Docusign can help make managing your various consulting agreement documents as easy as possible. DocuSign IAM provides you with a single, centralized database for storing and editing consulting agreements that you can access from any connected device.

_{This content is for general educational purposes only and is not intended, and should not be considered, legal advice. Laws frequently change and this information may not be current or accurate. Docusign disclaims all warranties of any kind with respect to this material including merchantability, fitness for a particular purpose, or accuracy. You should consult with a licensed attorney in your area for legal advice.}