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Consulting Contract Tips & Templates

Consulting Contract Tips & Templates

This resource provides templates and a review of the most common contracts used by independent management consultants: the contract between a consulting firm and client; an agreement to use with subcontractors; non-disclosure agreements (NDA); and a non-reliance letter.

This resource includes a download link for these agreements that you can save and customize for use in your own practice (available as a Word Doc download and in Google Docs — make a copy to use). We also provide an explanation of the clauses and terms in the agreements in this resource.

These templates are intended to serve as a starting point only and should be tailored to meet your specific requirements. These documents should not be construed as legal advice for any particular factors or circumstances.

You should consult with an attorney regarding legal interpretation or assistance with these contracts, or if you have any questions. We offer a directory of attorneys recommended by consultants at this Resource.

Contents

You can click any section to go directly there:

Unleashed Podcast: Matt Weill on consulting contracts

The agreement templates were drafted by Matt Weill, an attorney and partner at Golenbock Eiseman Assor Bell & Peskoe LLP.

The information in this resource was largely informed by Episode 12 of Unleashed, in which Weill discusses and explains the various components of these consulting contracts.

Listen to Unleashed Episode 12 with Matt Weill on Consulting Contracts

Contract between consultant and client

Many consulting engagements are set up with a Master Service Agreement (MSA) between the consultant and the client, which allows for ongoing or repeat work over a period of time.

The MSA structures the terms and conditions for the agreement between the two parties, and governs the overall relationship. The specifics for each individual project are then included in a separate Statement Of Work (SOW), which details that specific project in relation to the services being provided, who will provide them, and the fees for that project.

The MSA rolls forward and continues to be used for additional work. There may be multiple SOWs that are covered by this agreement. The particulars of any future project would be described on a new SOW, which can be attached or signed off on as an engagement that is subject to the original MSA.

In some cases, the consultant is engaged for a specific project and delivering specific work product at the end of the engagement. In that case, the client and service provider would have a stand-alone contract that  addresses this one-time project. 

The main sections of a contract between consultants and their clients include the following.

Addresses

This information confirm who the parties to the contract are. Often a contract will include a notices provision which says if one party needs to deliver notice or communication to the other party it will do so at a listed address. This section allows each side to know where to communicate with the other side.

Consulting Services

This section lays the framework for the services being provided, which are detailed in the “Appendix Statement of Work,” which lists the specifics of the project in greater detail. That section is detailed separately.

In some cases, the Consulting Services section might refer to a proposal document that has already been provided to the client, if the scope of work was laid out clearly in the proposal.

It’s in everyone’s best interest to be clear upfront in terms of expectations around what the services will be.

Term

This section defines the start and end date of the governing MSA. This is not related to the start and end date of any individual project, which would be laid out in its corresponding SOW.

The term may be:

  • Fixed Term. This has a set end date. Make sure the date is far enough out for you to complete the work agreed to.
  • Open-ended Term. No specified end date, allowing for the agreement to continue until either party terminates it. 

You also want to clarify the agreed terms around an early termination of the contract, outlining what fees and deliverables would be due upon such an event.

Fees & Expenses

This section discusses the payment term and method for consulting fees and expenses. The actual fees for an individual project should be included in the Statement of Work.

It’s important to have the following terms clarified up front:

  • Expenses. What expenses will be reimbursed and when, as well as the process for submitting receipts and getting approval for expenses.
  • Payment Terms. The standard for consulting services is typically net 30 days, during which period the payment is due and considered late after that time. You may encounter clients with a payment policy of net 60 or 90 days. In these cases, you may or may not be able to negotiate those terms.
  • Payment Method. States whether the payment will be made by check, ACH/electronic deposit, wire transfer, etc. Without specifying this in the agreement, a client may pay you by credit card resulting in additional fees to you. 
  • Invoicing. How often you will submit invoices and by what method. 

If you are billing on time and materials, this might be invoiced at the end of each month. If you’re billing on a fixed fee, it’s particularly important to agree in advance what the invoice plan will be.

For example, if you are entering into a six-month engagement with a $100,000 fee, you might agree to submit an invoice for 1/6 of the fee on the last day of each month.

You may also consider whether you want to include a clause that requires the client to pay interest or a late fee if the payment is not made on time. Most clients won’t agree to such a clause, but it’s an optional negotiating point that can be used to set clear expectations as to payment terms.

Additional Resource: How To Set Consulting Fees

Independent Contractor

This section expresses the understanding and agreement that the consultant is an independent contractor, versus an employee, for tax and labor law purposes.

“When we’re working with independent management consultants, it’s important to be clear upfront that you are not an employee of your client,” Weill says. “It’s a multi-part test that the IRS and Department of Labor uses.”

The factors include:

  • Level of control the client exerts over the contractor’s activities and time.
  • Whether the contractor uses their own equipment or the client’s.
  • If the contractor works for multiple clients or just one company.

“Typically if you are working for multiple clients and not unique to one particular person or entity, and if you’re able to do things on your own timeline using your own equipment, those are all good factors which suggest that you’re an independent and not, in fact, an employee,” Weill advises.

As an independent contractor, payments will be made as gross payments, with no taxes or other withholding deducted. The independent contractor is responsible for filing and paying their own taxes.

We strongly recommend that you consult an attorney and a tax accountant who are familiar with the world of independent consulting.

If a situation arises where you’re really doing all of your work for one client for one extended period of time, it might be worth talking to an attorney and/or tax accountant.

Confidential Information

This clause states the responsibilities of the consultant to protect the confidential information of the client and lays out non-disclosure agreements.

It typically will carve out specific exceptions that will allow disclosure in specific cases, such as a legally induced reason.

“Confidentiality can sometimes be a hot button issue on the client’s side,” Weill says. “Clients are entrusting you with their secret and proprietary information that’s not necessarily publicly known. And as a condition to sharing that information with you, the client will expect that you keep that information confidential and not use it other than in the context of the services that you’re performing for them.”

Indemnification

Indemnification is an obligation by one party to hold another party harmless for losses, liabilities, expenses that the second party may incur as a result of something.

It’s a risk allocation issue, and has the effect of shifting responsibility for third party claims, as well as attorney’s fees and cost associated with defending most third party claims from one party to another.

For example, in the absence of an indemnification clause, if a suit was brought for breach of contract the plaintiff would be responsible for covering their own legal fees. If, on the other hand, an indemnification clause existed that cover’s attorney fees, then the plaintiff could recover those fees.

Indemnification should really be tied to “bad acts,” Weill says.

“It shouldn’t just be that you, the consultant, are indemnifying the client for any losses the client may sustain related to the services you are performing. That’s not a fair standard. It should really be if you are grossly negligent, or engage in some type of willful misconduct, or fraud, or other bad acts in connection with providing the services. Then arguably the client, I think, has a right to ask for that type of indemnification.”

In the standard contract template we’ve provided, indemnification is limited to the amount of fees paid under the agreement, and excludes certain types of damages which could exceed the actual out-of-pocket cost to the client — such as punitive damages that are not tied to the actual losses the client sustains.

Limitation of Liability

This limits the liability of one or both parties to a specific dollar amount under certain conditions. In our contract template, this clause states that neither party liable to the other for lost profits or punitive special indirect, incidental, exemplary, or consequential damage related to the agreement, even if the party was advised of the possibility of those damages.

In some cases liability will be limited unless the consultant has exhibited willful misconduct or done something that was illegal. You may seek to include the limitation of your liability to the fees you were paid. Not every client will agree to that limitation, but many will find it acceptable.

Force Majeure

This is a service provider-friendly concept that says if you, the consultant, are unable to perform services because of something out of your control — because there was a natural disaster such as a hurricane or flood, or catastrophic event such as the COVID-19 pandemic — then you’re not on the hook.

“You’re not liable for any losses, costs, or expenses incurred as a result of that act or that occurrence that you couldn’t control,” Weill explains.

Successors & Assigns

Simply states that the agreement may not be assigned in whole or part by either party without the prior written consent of the other party.

Severability

This states that if a certain portion of the agreement is found to be invalid, prohibited, or unenforceable, that would not invalidate the other provisions of the agreement.

Entire Agreement & Waivers

This section clarifies that there is no other agreement besides this one, and no other oral or written agreement is enforceable. It also states that if either party issues a waiver to a breach of the agreement, that doesn’t mean they can’t subsequently enforce the terms.

Construction & Interpretation

The agreement is drafted jointly by both parties, and no presumption or burden of proof shall favoring either party in regards to its authorship.

Governing Law & Arbitration

This defines the state — and sometimes the county — in which the agreement will be governed and its laws applied. If a lawsuit were to arise in conjunction with the contract, this is the jurisdiction in which the lawsuit must be filed and take place.

You should speak to your attorney to determine your first choice for location of governing law. Most consultants prefer that to be their home state, but there could be exceptions.

Your client also probably prefers their state to be the governing law. When two parties are in different states (or countries), they may be willing to have a neutral state, such as Delaware, be set as the governing body of law.

Arbitration is when you agree to settle disputes without going to court. Different practitioners have different views on this. Originally, arbitration was viewed as a somewhat more streamlined, more confidential, and, at times, more cost-effective option than a lawsuit. Many people prefer arbitration as a dispute resolution mechanism for commercial contracts.

Counterparts & Signatures

This simply states that the agreement may be executed by electronic signature, which would be deemed the same as an original signature.

Appendix: Statement of Work

This appendix outlines the details of the work to be performed for a specific engagement, and should include:

  • Consultant company name
  • Client company name
  • Effective date
  • Description of services
  • Name of the individual performing the work
  • Professional fees

If the engagement will require significant upfront time or expenditures on your side, you might consider asking for a retainer to be paid upfront.

Additional Resource: Invoice Tips & Templates

Insurance Requirements

Some clients will insist on using their own contract template. In many cases these templates will include business liability insurance requirements on the part of the service provider.

This is a good reason to get business liability insurance in advance, because it can take four to six weeks to obtain.

If you do have insurance but don’t meet the threshold the client is asking for, it’s often possible to negotiate this. If the client requires $5 million coverage, for example, but your policy provides for $2 million, the client might agree to that.

Checklist for signing the client's contract

If a client requires use of their own contract, we’ve provided a checklist that you can use to make notes for items you want to include or negotiate.

Contract between a consultant and a subcontractor

The next common contract you may need to enter is that with any subcontractors you wish to use, or if you are going to act as a subcontractor for another party.

Just as with contracts with clients, many times a subcontractor is set up with a Master Service Agreement (MSA) for ongoing or repeat work over a period of time.

The MSA structures the terms and conditions for the agreement between the Prime Contractor (the consultant/consulting firm) and the Subcontractor, and governs the overall relationship. The specifics for each individual project are then included in a separate Statement Of Work (SOW), which details a specific project.

The MSA rolls forward and continues to be used for additional work. There may be multiple SOWs that are covered by the MSA. The particulars of any future project would be described on a new SOW, which can be attached or signed off on as an engagement that is subject to the original MSA.

In some cases, the subcontractor is engaged for a specific project and delivering specific work product at the end of the engagement. In that case, you might have a stand-alone contract with your subcontractor that  addresses this one-time project. 

The main considerations for a subcontractor contract include the following.

Parity

A contract for the relationship between a Prime Contractor and a Subcontractor should be as fair as possible for both parties. Our contract template, above, is slightly more favorable towards the Prime Contractor who is engaging the Subcontractor.

If you are planning to subcontract your services to someone else, they may have their own agreement — if not, you could offer your own contract. In that case, you may wish to reword some sections so that it is more favorable to you as the Subcontractor.

Engagement of Contractor/Scope of Services

Similar to a contract with your client, this section sets the groundwork for the services being provided by the subcontractor, with the details of the work to be done outlined in an Appendix Statement of Work.

Incorporation of Prime Contract

This clause references the fact that above the Subcontractor agreement, there is also the Prime Contract with the client. This confirms that the Subcontractor has read that agreement, or at least the Statement of Work and parts of the agreement that apply to them, and will perform their work to those requirements.

“If you’re the one who has the relationship with Pfizer (for example) but you need to bring in a subcontractor, it’s important that your subcontractor understands what obligations you will have to Pfizer. So, whether you give them the full contract with Pfizer or not, or share the full statement of work, you’re basically on the hook for the subcontractor’s performance — so you need to make sure that they’re adhering to whatever standards you have agreed to,” Weill explains.

Fees & Expenses

Ideally, you don’t want to be in a position where you need to pay the subcontractor before you have been paid by the client. This section states that once you are paid by the client, you’ll pass through the applicable portion of that fee to the subcontractor, to avoid a situation where you’re out of pocket before you’ve actually been paid.

Term & Termination

Sets the start date of the engagement, and the end date as the expiration date of the Prime Contract. It can also include contingencies for the subcontractor agreement to be terminated early.

The key point to negotiate in that circumstance is what fees are payable upon early termination, as well as deliverables and confidential information that must be returned upon termination. 

Availability & Non-Circumvention

This sets the agreement that the Subcontractor will not commit to other obligations or agreements that would prevent them from the timely and proper completion of services.

The non-circumvention clause states that the Subcontractor will not to commit to any other obligations or enter into any other agreement that would preclude their performance and completion of the services they are providing to the Prime Contractor.

It also provides for the understanding that the client may have certain termination rights.

Another section of this clause pertains to future work with the client. Some contracts may state, for example, that the Subcontractor may not perform any work for the client for a certain period of time without going through the Prime Contractor, unless with the written permission of the Prime Contractor.

Some people may have issues with this clause as a Subcontractor. There is a threshold question about enforceability of this type of restriction, although it’s difficult to give a blanket answer regarding non-compete or non-circumvention enforceability.

“The legal test is whether or not you’re protecting a legitimate business interest, whether there is adequate consideration for the covenant, and whether the restrictions are reasonable in duration and scope,” Weill says. “So that’s a legal framework. But within that framework, it really depends on the context.”

Confidentiality & Work for Hire

Ensures that all confidential material the Subcontractor has access to will remain confidential, and that all work product, intellectual property, and/or materials developed during the project are the property of the client.

Certain Representations, Warranties & Agreements; Indemnity

States that the Subcontractor has the authority to enter into the agreement and perform the services, and that they have the professional capacity and expertise to perform the services.

Additionally, it lays out that the services they perform will not infringe any third-party patterns, copyrights, trademarks, or other intellectual property.

The indemnity clause is similar to that discussed above in the Client Contract section.

Nature of Relationship

This clarifies that the Subcontractor will be, at all times, an independent contractor of the Prime Contractor.

Miscellaneous

This section allows for various additional items that should be addressed in the contract.

  • The agreement may not be assigned to another party.
  • Jurisdiction.
  • Entire agreement and understanding.
  • Jointly drafted and agreed contract.
  • State in which all governing laws apply.
  • Electronic signatures are valid and binding.

Additional Resource: Invoice Template

Non-disclosure Agreements

Before a client signs a contract with you they may find it beneficial to supply you with confidential information for your proposal. The following non-disclosure agreement (NDA) covers the protection of that information.

If an NDA wasn’t necessary before entering into the contract, this agreement would not be applicable now, as the terms of its protection are already covered in the contract.

We have also provided an NDA you can use with a subcontractor. 

Mutual non-disclosure agreement between consultant and prospective client

Download Word Version

Access Google Docs Version

Mutual non-disclosure agreement between consultant and subcontractor

Download Word Version

Access Google Docs Version

Non-reliance Letter Template

A non-reliance letter, in essence, states that no communication (written or oral) received from a party shall be deemed to be an assurance or guarantee as to the expected results of that transaction for another party.

These are typically standard documents that incorporate routine clauses protecting the company or individual issuing the letter from liability. Most consultants will use the same letter in every instance, changing only the names of the involved parties and the description of the underlying transaction.