In any business agreement, the use of a well-written contract is highly recommended; they provide clarity, establish the relationship, and offer protection to all parties involved. For these reasons, many independent consultants wisely insist on using written contracts for every client project. In some cases the consultant will use their own contract, but it is often the client who will create and extend a contract offer to a consultant.
When presented with a contract written by another party, it is your responsibility to ensure that you understand and agree with all terms. Before you do anything else, carefully read through your entire contract. Don’t feel pressured to sign the contract on the spot. If you find anything in the contract unclear, ask for an explanation. If you still have any doubts, have a lawyer look over the contract; in fact, having a lawyer look over any contract before you sign it is advisable, particularly as a new consultant or when working with complex agreements. MBO Partners will also help consultants who run their business through us review their contracts for potential issues, including ones that commonly arise in the areas below.
After you have discussed the project with the client and are presented with a contract, carefully review the scope of the project as well as any duties and responsibilities to verify that they are consistent with you understood them to be. Additionally, all information should be as detailed as possible, including all deadlines and expected deliverables. If there are any discrepancies, they should be discussed with the client immediately to address the possibility of miscommunication. Explain to the client that accurate and complete information in the contract is in their best interest as well as yours; it’s important that both parties’ expectations are aligned so that you are able to create a final product that serves their needs and meets their expectations. You should also explain that having the clearest possible understanding of the scope of the project ensures that you don’t unintentionally overpromise on deadlines or capabilities that you are unable to meet.
Even if you’ve established a standard billing rate for your consulting services, there may be opportunities for the right project or the right client that allow for some negotiation room. While these negotiations take place before a contract is drawn up, they can greatly impact the terms of the agreement. The key to fee negotiation is to come to the table prepared. Know ahead of time what you want, what you plan on asking for, and your absolute bottom line. Remain confident in your negotiations, and don’t hesitate to leverage any value-added intangible benefits you offer.
In addition to what you will be paid, the contract should also specify how and when you will be paid. Don’t rely on a verbal payment arrangement if the payment terms in the contract are incorrect or absent; insist that the agreed-upon terms be included in the contract. Simply explain that you don’t want there to be any confusion down the road, and having the terms outlined in the contract will serve as an easy reference if needed.
Non-compete clauses are designed to prevent employees from leaving a company and taking their knowledge and insider information to a competitor. As an independent consultant, it is rarely a good idea to sign a non-compete agreement; the temporary nature of your work could leave you unable to find more work after the current project ends. Don’t count on the clause being difficult to enforce, or a client’s verbal assurance that they won’t enforce it; if you sign a contract with a non-compete clause, you should assume that it can and will be enforced. Instead, do what you can to have the clause removed from the contract.
If a contract a client presents does contain a non-compete clause, your first course of action should be to explain that the clause would effectively prohibit you from working and remaining in business after the contract ends, and ask that the client remove the clause. Often, the client will understand your position and agree to remove the clause.
In other cases, the client may insist that the clause is necessary in order to protect their intellectual property. In these instances, the key is to find a solution that addresses the client’s concerns without the restrictions of a non-compete. Instead, you might offer to sign a non-disclosure clause or a limited non-solicitation agreement in lieu of the non-compete.
If the client is adamant about including the non-compete clause, your final option may be to try to limit the scope of the clause. Ask to have the clause modified so that the restrictions are more reasonable, such as only applying to a select few of the client’s competitors. If the client is unwilling to do this, it may be time to walk away from the job.
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News and notes for independent professionals and their clients. This is the October 17, 2016 edition.