What to Include in a Consulting Agreement: 7 Sections Every Agreement Should Have

By MBO Partners | May 24, 2021

Share
consultant working on tablet img (2)

An independent contractor agreement should provide as much protection as possible, while also clearly establishing expectations of both parties. The exact language and sections included in your contract may vary depending on your industry, client type, and location.

Independent contractor agreements are particularly important for independent contractors to provide:

  • legal protection
  • establish roles and responsibilities
  • outline services to be performed

What to Include in a Consulting Agreement

While your contract may contain much more information, here are seven key sections that should be included in any contract between an independent contractor or consultant and their client.

1. Statement of Relationship

One important, but easy to overlook section of your independent contractor agreement is defining your role as a consultant or contractor. This is important both for you, if you ever have to prove your work status for tax or financial purposes, and for your client, as protection against employee misclassification.

Remember, a contractor-client relationship is a business relationship, not an employer-employee relationship. This part of your independent contractor contract agreement may say something like: “[Your Name] is an independent contractor and is not an employee of [Name of Client].” You may also want to specify that you have the sole discretion of how, when, and where you fulfill the terms of your independent contractor agreement, and that you are responsible for providing the tools needed to perform the work.

2. Project Description

Next, it’s important to include the specifics of the work you are going to do. This will help to make sure you and your client are on the same page in terms of the scope of the project.

Discuss any and all tasks and deliverables that the client expects to be completed, and define a process for addressing scope creep. Having a backup plan in place will help ensure that changes are approved quickly so you can get the project back on track in the case of setbacks.

3. Payment and Billing Terms

When discussing your bill rate and terms for a project, know what you want ahead of time, what you plan on asking for, and what your absolute bottom line is. Price can sometimes be a point of contention in contract negotiation, but if you come prepared and confident, you can reach an agreement with your client.

In addition to payment, discuss how your client wants to be billed as well as net terms—the amount of time your client has to send payment after receiving an invoice.

4. Responsibilities of Each Party

When creating an independent contractor agreement, don’t assume that anything is understood—it’s best to get it in writing. If there are multiple departments or business units involved in a project, designate a point of contact and discuss how much time this person will have for reviews and approvals. Establish a process for communicating your progress that works best for you and your client. Some clients will require contractors to provide insurance coverage; if this is the case, it should be included in your contract.

5. Project Timeline and Deadlines

Include the general length of your working relationship in your independent contractor agreement; if you don’t know exactly when you will complete your project, you can list an approximate timeline. Outline concrete deadlines for project deliverables and discuss exactly what the client expects you to deliver at those points.

In addition, discuss what constitutes a successful deliverable or milestone. Setting actionable metrics will help you make progress towards your goals, and your client will know exactly what they can expect to receive at each step in the process.

6. Termination Conditions

Termination conditions outline the rights of both parties to cancel a independent contractor agreement. This is an important section to include in the event of a worse case scenario. Reasons to end a contract may include a breach of contract or nonpayment.

7. Nondisclosure Terms, and Confidentiality and Non-Compete Clauses

Non-compete clauses are designed to prevent employees from taking knowledge or insider information from a company to a competitor. As an independent contractor, non-competes are rarely a good thing to agree to because the very nature of your work involves moving from client to client—some of which are bound to be competitors.

If a client wants to include a non-compete clause, explain that this would prohibit you from remaining in business once the contract ends. If they insist, try and find a middle ground by including non-disclosure terms or a confidentiality clause.

The contract process is a great opportunity to establish a positive working relationship with your client. By aligning expectations, you can meet your client’s needs and have a clear idea of what they expect of you. Once you’re both on the same page, you can move forward with confidence.

For more information on writing a independent contractor agreement, download our guide.

Related Posts

How to Prepare for Tax Season as an Independent Contractor

Tax season as an independent contractor comes and goes throughout the year as you file quarterly, but April 15 tends to be the biggest date of the year as it is the deadline for personal income tax. There are many steps you can take in preparation for this deadline to help make sure filing goes…

Read More...
consultant looking at charts

Gross Income vs Net Income: Differences and How to Calculate

Gross income is the total amount you earn and net income is your actual business profit after expenses and allowable deductions are taken out. However, because gross income is used to calculate net income, these terms are easy to confuse. When you run your own business, understanding the difference between gross income and net income…

Read More...
consultant

Consulting Rates: How to Determine My Bill Rate

How do you calculate your consulting rate?  It’s a question most W2 employees ask themselves when they want to become a consultant. How can you maximize today and prepare for a profitable consulting business? 1. Evaluate Your Bill Rate When’s the last time you evaluated your pricing strategy? Have your bill rates remained steady for…

Read More...

Trending

Tags

Learn more about the MBO Platform

FOR INDEPENDENT
PROFESSIONALS

Start, run, and grow

your independent business with MBO

FOR
ENTERPRISES

Engage, scale, and optimize

your independent workforce