Consultancy Agreement: What Is Consultancy Agreement? Drafting, Pre-requisites & Consultancy Agreement Format

No matter how good or big, a business organisation cannot do everything independently. While the core activities of the business are primarily in-house, certain ancillary activities are often outsourced. 

Non-core activities or activities that the company doesn’t specialise in are done by consulting the experts or specialists, usually consultants. 

Consultants are external to the business organisation, and they can be individuals, partnership firms, LLPs or even other companies. They have specialisation in a field of work. 

Types of Consultancy Services 

The consultancy provides various services such as – 

• Accounting
• Human Resources 
• E-commerce 
• Business Processes 
• Financial Services 
• Legal Services 
• Strategy 
• Operations 
• Financial 
• Marketing 
• IT Services/Technology 
• PR Consultancy
• Payroll Services 
• Sales 
• Environmental Consultancy
• Fitness, Healthcare and Wellness 

What is a Consultancy Agreement?

A consultancy agreement is an agreement that provides a thorough roadmap of the duties and obligations of both parties to the agreement, i.e. the client and consultant. 

A written agreement always helps to minimise complications when disputes arise. 

Important Points for drafting a Consultancy Agreement 

More often than not, some details get neglected while drafting a consultancy agreement. Before finalising the agreement, the terms and conditions should be thoroughly discussed and clarified to avoid misunderstandings in the future. It is advisable to consult a legal expert before finalising the agreement. 

Consultancy Agreements are regulated under The Indian Contract Act, 1932.

Consider the following factors before finalising the consultancy agreement.

1. Duties and Obligations of the client 
2. Duties and obligations of the consultant 
3. Security and confidentiality of the client 
4. Legal requirements
5. Terms regarding remuneration/consideration to the consultant
6. Law applicable to the specific consultancy agreement 
7. Duration of the agreement
8. Provisions for addressing defaults 
9. Dispute Resolution Mechanism
10.  Time limits
11.  Arbitration clause specifying the location and number of arbitrators
12.  Privacy clause 
13.  Non-compete clause 
14.  Non-Disclosure clause 
15.  Non-Solicit clause   
16.  Conditions to be followed after the termination of consultancy agreement 

Note: Companies and organisations should change every consultancy agreement depending upon its type. 

Pre-requisites of a Consultancy Agreement

Since a consultancy agreement is a contract, only persons who are legally compatible to make a  contract can be the parties to the agreement. 

Also, the relationship of a client-consultant should exist to make such agreement, i.e one person should be the consultant who provides consultancy services and the other one who avails the services.  

Persons Competent to a Contract

1. An individual who is above the age of 18
2. A person of sound mind
3. A person who is not disallowed by any legal implication to enter into a contract 

Sample Format of a Consultancy Agreement 

Consultancy Agreement Sample

This Consultancy Agreement has been made on __ (date) of __ (month), ____ (year) at ______ (place of making the agreement) between: 

______ (name of the client), a company incorporated under The Companies Act, 2013 having its Registered Office at ______ (hereinafter referred to as “The Company”) as being the First Party 

and

______ (name of the consultant), an individual or a partnership firm or a company, registered under Indian Partnership Act 1932 or LLP act 2008, or Companies Act, 2013 residing at______ or having its registered office at_____ (hereinafter referred to as ‘short name of the individual’ or ‘the firm’ or ‘the company’) as being the Second Party

Whereas:

1. The Company (Client name) is engaged in the business of ______ and intends to ______ (purpose of consulting) and has decided to appoint ______ (Consultant name) for the implementation of _____. 

2. ______ (Consultant Name) is a ______ (Type of consultant), registered under ______ (the name of the act), having an experience of __ years in providing ______ (type of service provided) and is a person/firm/company of repute. 

3. ______ (Client name) hereby appoints ______ (Consultant name) as a consultant for _____ (services provided) for a consideration of ₹______ which has been duly consented by the ______ (Client name) and approved by the Board of Directors of the company at their meeting held on ______, on the terms and conditions provided hereinafter. 

Now this deed witnesses as under 

1. Consideration 

(Terms related to consideration such as amount, percentage commission if applicable, mode of payment etc)

2. Receipt Clause 

(Acknowledgement of the receipt of payment by the consultant)  

3. Duties of the _____ (name of the consultant) as ______ (type of service provided)

(A comprehensive detail of the duties of the consultant) 

4. Representation and Warranty from ______ (client name)
5. Representation and Warranty from ______ (consultant name)
6. Confidentiality Clause
7. Exclusivity Clause (optional)
8. No IPR Clause 
9. Non-Compete Clause (optional)
10.  Breach of Contract 
11.  Dispute Resolution
12.  Force Majeure 
13.  Any other clauses depending upon the nature of the agreement
    

In witness whereof, the parties hereto and hereunto have executed this agreement on the date mentioned aforesaid. 

Signature of the client                                            Attestation by Witness

Signature of the consultant                         Attestation by Witness