Consulting contracts are essential for professional consultants such as engineers, architects, and quantity surveyors. These agreements govern the provision of professional advice and services, ensuring clarity and fairness between consultants and their clients. However, navigating consulting contracts can be complex, particularly when dealing with bespoke agreements or heavily amended standard forms.
This article is written by our consultancy agreement lawyers. It provides a comprehensive understanding of consulting contracts in Australia, offering practical advice on how to draft, review, and negotiate these agreements effectively.
Consulting contracts are professional services agreements that outline the terms under which consultants provide their expertise. These contracts are commonly used in industries such as engineering, architecture, and other professional services.
The primary purpose of a consulting contract is to balance the risks and obligations between the consultant and the client. A well-drafted agreement ensures that both parties understand their responsibilities, minimising the likelihood of disputes.
An effective consulting contract fairly allocates risks between the consultant and the client. Imposing obligations on a consultant that they cannot control or comply with increases the likelihood of disputes.
For example, requiring a consultant to indemnify a client for losses caused by third parties or the client’s own actions is both unfair and risky.
Indemnity Clauses: Ensure indemnities are limited to matters within the consultant’s control
Scope of Work: Clearly define the scope of services to avoid misunderstandings
Payment Terms: Include clear payment milestones and address potential cash flow issues
Inspection and Design Certificates: Ensure that inspection and design certificates are only certifying your design and do not include unusual terms
Consulting contracts can take various forms, including:
|
Type of Contract |
Description |
|
Australian Standard Contracts |
Such as AS4122-2010, often heavily amended by clients |
|
Bespoke Agreements |
Tailored contracts specific to a client’s needs |
|
Consultant’s Terms and Conditions |
Typically attached to a fee proposal |
From a consultancy firm’s perspective, having greater involvement in drafting or amending the contract is ideal. However, clients often hold leverage due to their control over cash flow, making it challenging for consultants to insist on their preferred terms.
When dealing with new clients, it is crucial to assess their reliability and financial stability. Key questions to consider include:
Sophisticated clients—those with in–house legal teams or experience negotiating contracts—tend to approach negotiations more professionally. In contrast, less experienced clients may reject amendments without explanation or respond combatively, leading to protracted negotiations.
Before reviewing a contract, gather background information about:
Contracts often contain interlinked clauses, such as definitions that impact operative clauses. Skipping sections can lead to misunderstandings or missed issues.
Use tracked changes to edit the contract and create a schedule of departures. This document should include:
|
Clause Number |
Requested Departure |
Reason for Change |
Client Response |
|
|
|
|
|
Providing clear reasons for requested changes increases the likelihood of agreement.
Start by sending the schedule of departures to the client for review. If an impasse is reached, arrange a phone or video call to discuss contentious items. Verbal negotiations can often lead to quicker resolutions.
Before signing the contract:
Indemnity clauses can be problematic for consultants if they:
To protect against scope creep, clearly define deliverables and timelines in the contract. Include a clause addressing how additional work will be handled and billed.
A consulting contract should include the scope of work, payment terms, confidentiality clauses, indemnity provisions, and termination conditions.
Customisation ensures the contract meets the specific needs of both the consultant and the client, reducing the risk of disputes.
Limit indemnities to matters within your control and avoid agreeing to indemnify losses caused by third parties or the client.
Consider explaining the reasons for your requested changes and propose alternative wording. If necessary, escalate discussions to a phone or video call.
Clearly define the scope of work and include a clause specifying how additional work will be managed and billed.
By following these guidelines, consultants can navigate the complexities of consulting contracts with confidence, ensuring fair and balanced agreements that protect their interests. For further assistance with consulting contracts, contact our experienced commercial lawyers today.
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