Should I Negotiate My Consultancy Agreement?

As an individual consultant delivering services, entering into a consultancy agreement is a step you should approach carefully. Negotiating your consultancy agreement is crucial for protecting yourself from risk and safeguarding your best interests. This article explores why you should seek to negotiate your consultancy agreement and key commonly negotiated terms. 

Why Is Negotiation of a Consultancy Agreement Important?

A consultancy agreement is typically between a business and an individual contractor who is not an employee.  It generally forms a business-to-business arrangement rather than an employment relationship. 

When you receive a consultancy agreement from a client, you might feel tempted to accept the terms, for instance, if you are keen to secure a new client or project. However, taking the time to negotiate the agreement is about more than just getting a better deal. It is about ensuring that the terms are transparent and fair and reflect your commercial agreement with your client. 

Negotiating your consulting contract will help set clear expectations regarding your services. You and your client can understand what each party expects by discussing and agreeing on the specific terms. This clarity can help to prevent misunderstandings and disputes later down the line. It is also a chance to put your best foot forward. 

For instance, negotiating increased payment terms may help you secure a better position for yourself. Contract negotiations will also allow you to carefully review key risk terms, such as terms around your liability to the client for breaching the agreement.  

What Are the Key Terms to Negotiate in a Consultancy Agreement?

There are various issues to review and negotiate when negotiating your consultancy agreement. 

Some of the most heavily negotiated terms include the following:

Negotiate Scope of Work

A vital part of your consultancy agreement is the scope of work. This should describe your services, including specific obligations, deliverables, timelines, and agreed critical milestones. Clearly defined services will help manage expectations and avoid misunderstandings and room for disputes. 

Also, you must take the time to check and ensure you are comfortable with the scope of work and services documented in your agreement. If you fail to deliver, your client could have a breach of contract claim against you and potentially claim damages. 

Negotiate Payment Terms

You must ensure you are happy with the terms your client will pay you under your consultancy agreement. This can sometimes be subject to heavy back and forth and negotiation. You must review a consultancy agreement to check whether you agree with the payment terms or if they reflect what you have already decided with the client. Payment terms must clearly state how much and when you will get paid, and you should seek to include remedies for late payments. These terms must meet your requirements as a consultant, as payment is the crucial reason you deliver the services. If you agree to charge your client for expenses, ensure this is set out in your agreement to avoid confusion or arguments over expense charges. 

Limiting Liability

You should always seek to negotiate limitation of liability clauses to limit your exposure under legal claims from your client. This could involve capping your maximum liability to the client for breaching the agreement to a specific amount you are comfortable with. Such clauses could specify that your liability is limited to the total fees paid under the contract or a different financial cap linked to your insurance coverage. 

This limitation clause can protect you from significant financial exposure in case of a claim. Otherwise, your liability to your client could be unlimited, which could mean substantial financial exposure and risk. 

Ensuring Clear Exit Rights and Fair Post Termination Restrictions 

As a consultant delivering services to a client, you should ensure that you have robust rights to exit the agreement. For instance, if you feel that the client relationship could be better or significant changes in the project requirements affect your ability to deliver the agreed services. 

You should negotiate a flexible notice period to terminate the agreement. This could include the ability to terminate for convenience with a reasonable notice period or immediately if certain trigger events apply. Clear exit rights enable you to leave no longer beneficial or manageable engagements, ensuring you are not stuck in an unfavourable commercial relationship. 

If the agreement contains post-termination restrictions following the end of your contract, you should ensure that they are fair and reasonable. If you require support with negotiating such terms, you should seek legal advice. 

What Are Some Practical Steps for Negotiating My Consultancy Agreement?

Negotiating a consultancy agreement can be a complicated process, but it is essential to ensure the protection of your rights and interests. Ensure that you carefully review your consultancy agreement, are well prepared for negotiations and are open and constructive with clients to reach a compromise position. 

If you require support throughout the negotiation process, you can work with a commercial lawyer to help advise and negotiate the contract on your behalf. A lawyer can also review and advise you on any risks you may not have spotted in the agreement, helping you confidently address them.  

Key Takeaways

Entering into a consultancy agreement as an individual consultant requires careful consideration. Negotiating the terms of your agreement is essential for mitigating risks and ensuring the protection of your interests. If you need support with negotiation, you can work with a contract lawyer to support you through the negotiation process. 

If you need help negotiating a consultancy agreement, LegalVision’s experienced contract lawyers can assist you as part of our LegalVision membership. For a low monthly fee, you will have unlimited access to lawyers to answer your questions and draft and review your documents. Call us today on 0808 196 8584 or visit our membership page.