What You Need to Know About Consultant Terms of Business

Providing services to a client? Make sure you have the deal in writing with some terms to protect you (but without annoying the client).

Use Terms of Business to protect you - without annoying the Client...

Use Terms of Business to protect you – without annoying the Client…

Whether you are providing services for a one off job or on a regular basis, it is always sensible to have the terms agreed in writing.  While the details of the service will vary depending on your trade or profession, very similar basic legal terms of business can be used by a wide range of people – from an accountant to an IT consultant, from a fitness instructor to a speech therapist.

A user-friendly way of dealing with your appointment is to confirm the key terms (start date, fees and description of services etc.) in a letter to the client and enclose some standard Terms of Business.

Here are some pointers for what to include:

Services

Depending on the type of service, you may need to set these out in detail. General wording is all very well but it can cause problems.  If, say, you offer to provide ‘accounting services’ for a client, have you agreed that this includes monthly management accounts and preparing a quarterly VAT return? Or if you are offering to design a website to meet the client’s brief, how many changes in outline design are covered by the fee?

So, ensure that the services are clearly defined.  Anything outside that scope may be an additional service that might attract an extra fee.

Timing and Duration – One Off Project, or Regular Work?

If you have a one-off project, you may want to specify a start and finish date, but it is safer to say that the final date is estimated and not guaranteed than to commit yourself to a fixed date that you might not meet.  And if you calculate your price by reference to an estimate of the time you are likely to spend, make it clear that excess time may attract an extra fee.

When you are going to provide services over a period – e.g. regular advice on a monthly basis, you may want to have a clause that commits the client to a minimum initial period, say six months, with this automatically rolling over for further periods of six months until a month’s notice is given by either party.

Fees & Expenses

You will set out the fees payable and you should also cover the payment terms – e.g. all fees to be payable within 14 days of the invoice date.  Other items to cover are out of pocket expenditure, price adjustments (in the event of changes or if you have a long term appointment) and payment of interest on overdue accounts.  Sometimes a consultant will also reserve the right to suspend services if payments are not made on time.  If you are supplying services to a business the law allows you to claim interest on late payment at 8% above Bank of England Base Rate.

Information and Approvals

It can help if the Terms make it clear that you are entitled to rely on information provided by the client and that the client has a contractual obligation to make decisions which are needed in a timely manner – all too often a client will sit on a request for approval which can cause real problems for a consultant.

Changes

Include a clause that allows you to adjust the fees and timing if the client asks for changes to the scope and if you encounter some unexpected problem.  And, especially if the client initiates a change, make it clear that the price adjustment has to be agreed in writing before the change is implemented.  It can be useful to have pre-agreed rates in the contract against which any change is calculated.

Intellectual Property

Depending on the nature of your work, you may want a clause stating that you retain copyright in the documents and designs which you prepare and the client has a licence to use them for the purposes for which they are supplied provided he pays the fees.  Sometimes the client will want to take ownership of the copyright – e.g. if you design a logo for his business.

Limiting Liability & Insurance

It is sensible to have a term that limits your liability for any claims the client might want to bring against you.  First of all it is sensible to say that liability for economic and consequential loss is excluded.  If, for example, you provide IT support, this should exclude any liability for a client’s loss of business if his system crashes due to some error on your part.  In such a case it is better to say you will fix any problems that you are responsible for at your expense, but with a reasonable overall cash limit.  Trying to exclude all liability is unlikely to be accepted and, even if it is, the client might later argue you have included an unfair term in you contract – and if a court agrees, that term would not be effective to protect you.

If you have professional indemnity insurance, include a clause that says your liability will be limited to the amount recoverable from your insurers if there is a valid negligence claim against you from the client.

Terminating the Contract

There is no automatic right for someone to terminate a contract so you should include a suitable clause.  This will usually allow either party to terminate if the other becomes insolvent or commits a breach of the contract.  On termination have clause that makes it clear you are entitled to all fees and expenses due up to termination plus reasonable costs and loss of profit if the termination is due to the client’s breach of contract.

Resolving Disputes

As court proceedings are expensive and time consuming, a clause can be included requiring any dispute to be referred to mediation before it goes to court.  Mediation is a cheaper and less adversarial way of sorting out problems. CEDR is an organisation that provides this service – www.cedr.com

ContractStore offers several templates for service providers and consultants:

This entry was posted in Business Contracts, Guidance Articles, Running an SME and tagged , , , , by Giles. Bookmark the permalink.

About Giles

Giles is the founder and managing director of ContractStore. It was his idea to set up a company selling documents online and he has played a major part in the company's development. He is an English solicitor, with over thirty years' experience of drafting and negotiating commercial and construction contracts in the UK and overseas. Giles has long been convinced that there is a quicker and simpler approach to the delivery and supply of most contracts, and he is an active proponent of the use of plain English in legal documents. He specialises in the drafting of construction and engineering contracts and as well as contributing contracts to the ContractStore website, he is co-author of the JCT Constructing Excellence Contract and of 'Exporting Made Easy' with Simon Bedford.

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