Updated July 19, 2023
A consulting agreement is used between a client and a consultant who provides professional services, advice, or knowledge in exchange for payment. A consultant is usually an expert in their field with vast experience and extensive knowledge.
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What is a Consulting Agreement?
A consulting agreement is between a consultant that offers their services to a client for payment. Under this arrangement, the consultant is working as an independent contractor, and any work that is provided falls under the ownership of the client unless otherwise agreed upon.
Payment Methods
The agreement can be structured in two ways:
1. Per Hour ($/HR)
The most common structure is the client agrees to pay the consultant per hour ($/hr). A maximum number of hours will usually be set for a given time period.
- Example: $20 per hour with the client agreeing to a maximum of 40 hours per month.
2. Per Project
The client agrees to pay the consultant a fixed amount to complete the project. Therefore, if it takes one hour or 100 hours, the consultant will be paid the same amount. This is ideal for the client in an effort to keep costs at a manageable amount.
- Example: An attorney agrees to complete a client’s estate planning for a payment of $3,500.
What is a Retainer?
A retainer is an upfront payment made by the client that is required by the consultant in order to start the work.
In most cases, a retainer represents a minimum amount of billable hours paid immediately by the client ensuring the consultant that their services are required for an extended period of time. This gives the consultant the security they need to invest the proper amount of time into the project without fear of the client breaking their commitment or infringing on the agreement.
Retainer vs. Non-Retainer
For retainer agreements:
- A minimum deposit or pre-ordered number of hours is required
- Long-term or ongoing
- The consultant usually has more than five years of experience
- The industry is highly competitive
For non-retainer agreements:
- A minimum deposit or pre-ordered number of hours is not required
- Short-term
- The consultant usually has less than five years of experience
- The industry is not as competitive
Sample Consulting Agreement
CONSULTING AGREEMENT
I. THE PARTIES. This Consulting Agreement (“Agreement”) is made effective as of [DATE], by and between:
Consultant: [NAME OF CONSULTANT] with a mailing address of [ADDRESS] (“Consultant”), and
Client: [NAME OF CLIENT] with a mailing address of [ADDRESS] (“Client”).
II. SERVICES. Consultant agrees to provide the following Services: [DESCRIPTION OF SERVICES] (“Services”).
III. TERM. The Services shall commence on [DATE], and end: (check one)
☐ – On the date of [DATE].
☐ – At completion of the Services performed.
☐ – Upon either party may terminate this Agreement with [#] days’ notice.
☐ – Other. [DESCRIBE].
IV. COMPENSATION. In consideration for the Services provided, the Consultant is to be paid in the following manner: (check all that apply)
☐ – Per Hour. $[AMOUNT] /hour.
☐ – Per Job. $[AMOUNT] for the completion of the Services.
☐ – Commission. [#]% commission based on [DESCRIBE].
☐ – Other. [DESCRIBE].
V. PAYMENT METHOD. Consultant shall be paid, in accordance with section IV, in the following manner: (check one)
☐ – On a ☐ weekly ☐ monthly ☐ quarterly basis beginning on [DATE].
☐ – At completion of the Services performed.
☐ – Upon the Client receiving an Invoice from the Consultant.
☐ – Other. [DESCRIBE].
VI. RETAINER. The Client is: (check one)
☐ – Required to pay a Retainer. The Client is required to pay a Retainer in the amount of $[AMOUNT] to the Consultant as an advance on future Services to be provided (“Retainer”). The Retainer is: (check one)
☐ – Refundable.
☐ – Non-Refundable.
☐ – Not required to pay a Retainer. The Client is not required to pay a Retainer before the Consultant is able to provide Services.
VII. CONTINGENCY. As part of the Consultant’s Pay: (check one)
☐ – There SHALL be a contingency-fee arrangement in accordance with: (check applicable)
☐ – [#]% of [AMOUNT].
☐ – flat fee of $[AMOUNT] for the following: [DESCRIBE]
☐ – There SHALL NOT be a contingency-fee arrangement as part of this Agreement.
VIII. EXPENSES. The Consultant shall be: (check one)
☐ – Responsible for ALL expenses.
☐ – Responsible for ONLY the following expenses: [LIST].
The Client agrees to pay the Consultant within thirty (30) days of receiving notice of any expense directly associated with the Services.
☐ – Responsible for NO expenses. The Client is not required to pay or be responsible for any expense in connection with the Services provided.
IX. DISPUTES. If any dispute arises under this Agreement, the Consultant and the Client shall negotiate in good faith to settle such dispute. If the parties cannot resolve such disputes themselves, then either party may submit the dispute to mediation by a mediator approved by both parties. The jurisdiction for any dispute shall be administered in the County of [COUNTY], State of [STATE].
X. LEGAL NOTICE. All notices required or permitted under this Agreement shall be in writing and shall be deemed delivered when delivered in-person or deposited in the United States Postal Service via Certified Mail with return receipt. If different from the mailing address in Section I, enter below:
Client’s Address: [ADDRESS]
Consultant’s Address: [ADDRESS]
XI. RETURN OF RECORDS. Upon termination of this Agreement, the Consultant shall deliver all records, notes, and data of any nature that are in the Consultant’s possession or under the Consultant’s control and that are of the Client’s property or relate to Client’s business.
XII. WAIVER OF CONTRACTUAL RIGHT. The failure of either party to enforce any provision of this Agreement shall not be construed as a waiver or limitation of that party’s right to subsequently enforce and compel strict compliance with every provision of this Agreement.
XIII. INDEPENDENT CONTRACTOR STATUS. The Consultant, under the code of the Internal Revenue (IRS), is an independent contractor and neither the Consultant’s employees or contract personnel are, or shall be deemed, the Client’s employees. In its capacity as an independent contractor, the Consultant agrees and represents:
a.) Consultant has the right to perform Services for others during the term of this Agreement;
b.) Consultant has the sole right to control and direct the means, manner, and method by which the Services required under this Agreement will be performed;
c.) The Services required by this Agreement shall be performed by the Consultant, Consultant’s employees or personnel, and the Client will not hire, supervise, or pay assistants to help the Consultant;
XIV. STATE AND FEDERAL LICENSES. The Consultant represents and warrants that all employees and personnel associated shall comply with federal, state, and local laws requiring any required licenses, permits, and certificates necessary to perform the Services under this Agreement.
XV. PAYMENT OF TAXES. Under this Agreement, the Client shall not be responsible for:
a.) Withholding FICA, Medicare, Social Security, or any other Federal or State withholding taxes from the Consultant’s payments to employees or personnel or make payments on behalf of the Consultant;
b.) Making Federal and/or State unemployment compensation contributions on the Consultant’s behalf; and
c.) Making payments of taxes incurred while performing the Services under this Agreement, including all applicable income taxes and, if the Consultant is not a business entity, all applicable self-employment taxes.
XVI. EMPLOYEES’ COMPENSATION. The Consultant shall be solely responsible for the following:
a.) Employee Benefits. The Consultant understands and agrees that they are solely responsible and shall be liable to all benefits that are provided to their employees, including, but not limited to, retirement plans, health insurance, vacation time-off, sick pay, personal leave, or any other benefit provided.
b.) Unemployment Compensation. The Consultant shall be solely responsible for the unemployment compensation payments on behalf of their employees and personnel.
c.) Workers’ Compensation. The Consultant shall be responsible for providing all workers’ compensation insurance on behalf of their employees.
XVII. INDEMNIFICATION. Consultant shall release, defend, indemnify, and hold harmless Client and its officers, agents, and employees from all suits, actions, or claims arising out of services provided under this Agreement or Consultant’s failure to perform or comply with any requirements of this Agreement.
XVIII. CONFIDENTIALITY & PROPRIETARY INFORMATION. The Consultant acknowledges that it will be necessary for the Client to disclose certain confidential and proprietary information to the Consultant in order for the Consultant to perform their duties under this Agreement.
Proprietary or confidential information includes, but is not limited to:
a.) The written, printed, graphic, or electronically recorded materials furnished by Client for Consultant to use;
b.) Any written or tangible information stamped “confidential,” “proprietary,” or with a similar legend;
c.) Information belonging to customers and suppliers of the Client about whom the Consultant gained knowledge as a result of the Consultant‘s Services to the Client.
Upon termination of the Consultant’s Services to the Client, or at the Client’s request, the Consultant shall deliver all materials to the Client in the Consultant’s possession relating to the Client’s business.
XIX. ASSIGNMENT AND DELEGATION. The Consultant may assign rights and may delegate duties under this Agreement to other individuals or entities acting as a subcontractor (“Subcontractor”).
The Consultant shall be responsible for any confidential or proprietary information that is shared with the Subcontractor in accordance with this section. If any such information is shared by the Subcontractor to third (3rd) parties, the Consultant shall be made liable.
XX. GOVERNING LAW. This Agreement shall be governed under the laws in the State of [STATE].
XXI. SEVERABILITY. This Agreement shall remain in effect in the event a section or provision is unenforceable or invalid.
XXII. ADDITIONAL TERMS & CONDITIONS. [LIST]
XXIII. ENTIRE AGREEMENT. This Agreement, along with any attachments or addendums, represents the entire agreement between the parties. Therefore, this Agreement supersedes any prior agreements, promises, conditions, or understandings between the Client and Consultant. This Agreement may be modified or amended if the amendment is made in writing and is signed by both parties.
IN WITNESS WHEREOF, the Parties hereto have executed this Agreement on the dates written hereunder.
Consultant’s Signature: ______________________ Date: _________________
Print Name: ___________________________
Client’s Signature: ________________________ Date: _________________
Print Name ___________________________
Consulting Agreement: Clauses
Confidentiality Clause
Description: A confidentiality clause is an agreement by the parties to not disclose the contents of the contract or any of the materials handed over to the consultant by the client. If the consultant or client should breach this clause, by informing third parties of trade secrets or any other forbidden information, it could irreparably harm the other party.
Sample Clause
Confidentiality. The Consultant acknowledges that it will be necessary for the Client to disclose certain confidential and proprietary information to the Consultant in order for the Consultant to perform their duties under this Agreement. The Consultant acknowledges that disclosure to a third party or misuse of this proprietary or confidential information would irreparably harm the Client. Accordingly, the Consultant will not disclose or use, either during or after the term of this Agreement, any proprietary or confidential information of the Client without the Client’s prior written permission except to the extent necessary to perform the Services on the Client’s behalf.
Non-Compete Clause
Description: A non-compete clause is a statement that ensures none of the parties will compete in each other’s business during or after the agreement. There are state laws that restrict the use of a non-compete and its time frame, but it is generally recommended no matter the laws in the state.
Sample Clause
Non-Compete. During the term of this Agreement, and for 12 months following its termination, the Consultant shall not engage in any activity that would compete in any way whatsoever with the activities of the Client in which the Consultant was or is involved, or where the Consultant gained confidential or sensitive information of the Customer, directly or indirectly through the delivery of the Services. For further clarity, this Section is to be geographically limited to areas and locations that the Customer operates and conducts its business activity.
Indemnification Clause
Description. An indemnification clause allows the consultant to work and provide their services while providing indemnification to the client for any consequences as a result of their work. Depending on the agreement type, the indemnification may or may not cover negligence and other liabilities whose fault is directly attributed to the client’s carelessness.
Sample Clause
Indemnification. Consultant shall release, defend, indemnify, and hold harmless Client and its officers, agents, and employees from all suits, actions, or claims of any character, name, or description including reasonable attorney fees, brought on account of any injuries or damage, or loss (real or alleged) received or sustained by any person, persons, or property, arising out of services provided under this Agreement or Consultant’s failure to perform or comply with any requirements of this Agreement including, but not limited to any claims for personal injury, property damage, or infringement of copyright, patent, or other proprietary rights. Client reserves the right to retain whatever funds which would be due to the Consultant under this Agreement until such suits, action or actions, claim or claims for injuries or damages as aforesaid shall have been settled and satisfactory evidence to that effect furnished.
Termination Clause
Description. A termination clause is very important as it allows either party to cancel the terms of the agreement, provided they notify the other party within a specified time period. The clause is simple and if there are any conditions to be added, such as payment by the Client for work completed, then it should be added to the clause.
Sample Clause
Termination. The Consultant and Client may: (check one)
☐ – Terminate this Agreement at any time with ____ days’ notice.
☐ – Not terminate this Agreement.