They Have You Covered!!
Hiring
a Consultant has many benefits. One of these is the clear
non-permanence of the association between you and the consultant.
Hiring consultants lets you avoid the considerable tax and
administrative costs that are part and parcel of hiring and preserving
regular employees. It also gives you access to specialised skills and
expertise that may not have been available in your own business
organisation.
Unfortunately, there are
also drawbacks to hiring consultants. While most consultants are
conscientious professionals, there are no guarantees to this effect. To
protect yourself and your business interests, you should carefully dot
the i's and cross the t's. In other words, you should draw up a
consultancy agreement.
The following are specific reasons for using a consultancy agreement in business:
- Formally set up consultancy relationship
A
formally sets up the relationship between you and the consultant. Thus,
there is no room for ambiguity about the nature and status of the
consultancy relationship; both parties know the relationship exists and
the consultancy agreement makes it formal and legal.
This makes it easier for you to seek compensation later for any damages
that may arise out of your association with the consultant and out of
the work the consultant has done for you. Furthermore, a formal
consultancy agreement also makes it easier for you to prove that you
hired a consultant, not an employee, and are thus entitled to the tax
benefits associated with hiring consultants.
- Clearly define the consultant's duties and responsibilities.
A
defines what is expected from the consultant. While it is more than
possible to get satisfactory results even if you have verbal agreement
with your consultant, it is better to safeguard your interests in case
you don't get the results you expect.
A
consultancy agreement gives you legal recourse if the consultant fails
to honour your agreement. Apart from giving you legal recourse in case
the consultant fails to deliver. A consultancy agreement also serves as
a handy guide for the consultant if he needs or wants clarifications
about what is expected in his or her ability as consultant.
- Define subcontracting responsibilities
While it is true that your control over the consultant you hire mainly
lies in the "what" (i.e. The result) and not the "how," you do have
some leeway over the consultant's methods of performing his or her
duties and responsibilities to you. Specifically, you have control over
whether your consultant may subcontract the tasks related to your
project.
Through a,
you can specify whether the consultant is allowed to subcontract his or
her tasks to other entities. In case subcontracting is allowed, the
consultancy agreement outlines the conditions which have to be met for
subcontracting permission to be granted. Finally, a consultancy
agreement makes it unquestionably clear the consultant has complete
responsibility for ensuring the quality, compliance and timeliness of
the output named in the agreement.
- Limit and Define Compensation
A consultancy agreement usually specifies the amount payable to the
consultant for his or her services. It also outlines which of the
consultants' expenses are covered by the consultancy fees. Typically,
the face value of the award is inclusive of the administrative and
operational costs involved in performing the consultant's duties and
responsibilities.
Thus, the consultancy
agreement protects you against arbitrary claims made by the consultant
that you are responsible for his or her costs (for example Telephone
bills, office space rental, office equipment buy or lease,), taxes and
other costs. This also protects you in case the consultant belatedly
decides the fees you have agreed to pay are, after all, not enough
compensation for services delivered.
- Know what to expect and when to expect it
The consultancy agreement typically has a schedule listing the
consultant's responsibilities. It breaks the output needed of the
consultant into tangible deliverables with definite deadlines.
Through a consultancy agreement, therefore, you know exactly what you
can expect from the consultant and when to expect it. This gives you
the ability to confidently plan other projects that depend on or
complement the project on which your consultant is working.
- Protect your intellectual property rights
A consultancy agreement also usually specifies who has intellectual
property rights over the contract materials (that is The output needed
of the consultant) and the know-how produced during the consultancy
relationship. It also states that rights to the materials and know-how
that your company brings into the relationship remains yours throughout
the duration and after finishing the agreement.
Thus, a consultancy agreement protects your intellectual property
rights. This gives you full legal protection in case the consultant
infringes on your rights over the materials and know-how produced by
the agreement and the project.
- Protect yourself against conflicts of interest
A consultancy agreement also says the consultant confirms that no
conflict of interest exists at the beginning of the agreement. It also
outlines the steps to be followed in case a conflict of interest does
arise during the consultant's performance of his or her duties to your
company.
This specific clause of a
consultancy agreement protects you against actions by the consultant
that may be harmful to your business interests. In case the consultant
enters the agreement with full knowledge that a conflict of interest
exists (or in case the consultant does nothing to tell you of a
conflict of interest arising later when the project is underway). You
have legal protection and right to seek legal compensation for the
consultant's breach.
- Ensure confidentiality and non-disclosure
A consultancy agreement also obligates the consultant not to disclose
proprietary or sensitive information to which it is given access by
your company during the project. Furthermore, in cases where an
intellectual property resulting from the project cannot be patented or
copyrighted, the consultancy agreement has a clause obligating the
consultant to keep such property confidential.
The consultancy agreement therefore protects your primary claim to and
ownership of proprietary information and materials even when such falls
under the unprotected intellectual property category. The consultancy
agreement, also, vests in you full ownership and control of sensitive
and proprietary information which you have no choice but let the
consultant access. A consultancy agreement gives you legal protection
in case the consultant fails to keep your intellectual property
confidential or is careless enough to disclose proprietary information
that has been named in the non-disclosure clause of the agreement.
- Indemnity against liability and loss arising from legal action by outside parties.
Since you do not have much control over how your consultant performs
the specific tasks related to your project, a consultant may
conceivably violate the law. He or she may even infringe on third-party
intellectual property rights – during his or her performance of the
duties named in your contract. For instance, your consultant or his or
her subcontractor, during designing proprietary software or systems for
your business, may use software to which he or she gained access
through another project. In this case, the third party whose
intellectual property rights have been violated has choices. To file a
claim to stop you from using or distributing the output that resulted
out of your consultant's infringement of intellectual property rights
or may even ask the proper courts to award them damages from the same.
A consultancy agreement protects you as it states that the consultant
indemnifies you against claims (intellectual property rights violation,
loss to life and property,) that arise out of the consultant's or his
or her subcontractors' illegal actions, omission or negligence.
- Facilitate dispute resolution and ending of the contract.
True to any other contract, the consultancy agreement usually has rules
for relationship breakdowns. The consultancy agreement will guide you
about what forms legitimate early ending of the contract, default on
the consultant's part and how disputes between you and the consultant
may be negotiated and resolved.
Thus,
since the consultancy agreement provides you with legitimate, extra
judicial means of dispute resolution and contract termination, you can
save on legal costs if the relationship breaks down.
- Define the duration of the consultancy
The consultancy agreement has a date of commencement and completion and thus defines the duration of the consultancy.
This grants you the advantages and protection of the consultancy
agreement during the period named – although some clauses such as
non-disclosure and indemnity do outlive this period and protect you
after the relationship has ended or has been terminated.