Chapter 16: CONSULTING CONTRACT

CHAPTER 16

Consulting Contract

THE PRIMARY FOCUS of this book is on contracts for the sales of goods. A contract for the sale of services has its own special problems, some of which are noted here. In the process of selling or buying goods, it is quite possible that you will need to establish service contracts. You may need a survey of the markets, a public relations promotion, or undercover investigation on infringement. The following contract is for a one-time consultation. If the need for services is ongoing, you may consider entering a retainer contract, by which the service provider agrees to furnish services for a monthly or annual fee. However, you must be extremely careful when making long-term service contracts overseas. In some countries, labor laws may require substantial payments for the termination of a consultant hired under a retainer agreement.

Sample: Consulting Contract

This Agreement is made as of [date], between [name], [a/an] [description and nationality] of [address] (the “Company”) and [name] of [address], [a/an] [description and nationality] (the “Consultant”), on the terms following: COMMENT: The parties identified in this clause should be the ones signing the agreement. Give the full name of each party and their business address. If a party is an entity, describe the type of entity (partnership, corporation, limited liability company, nonprofit corporation, and so forth). In international contracts, the description of each party includes the party’s nationality. Examples of descriptions: “a Société Anonyme organized and existing under the laws of France,” “a partnership organized and existing under the laws of the State of California in the United States of America,” or “an individual who is a citizen of Singapore.” 1. ENGAGEMENT. The Company engages the Consultant and the Consultant agrees to provide independent consulting services for purposes of [specify, e.g., surveying the consumer market in (country) for the sale of the Company’s Goods]. 2. TERM. This Agreement will begin on [date] and will continue until the Consultant renders a final market survey report to the Company. The parties agree that the market survey report will be submitted to the Company no later than [date]. 3. EFFORTS OF CONSULTANT. The Consultant will furnish the consulting services to the best of the Consultant’s ability. The Consultant will devote reasonable and conscientious effort to the consulting services. The parties acknowledge that the Consultant’s services are provided on a nonexclusive basis and will be performed at the locations and times that are convenient to the Consultant. Further, the Consultant will ensure that the services are in

compliance with all applicable laws. The Company takes no responsibility for the manner in which the Consultant performs the consulting services. COMMENT: This contract assumes that the consultant is an independent contractor, which means that the consultant is not an employee of the company. The distinction between independent contractor and employee is made for purposes of labor and tax laws. The laws of some countries may not recognize this distinction, in which case it is not important to keep the distance between the company and the consultant, as all persons hired will be considered employees. 4. COMPENSATION. The Company will pay the Consultant [currency and amount] as compensation for all consulting services rendered pursuant to this Agreement. The Company will pay the Consultant within [number] days after the Consultant completes the consulting services. No deductions will be made for any taxes, labor charges, licenses, or medical, or other purposes. COMMENT: Again, the assumption is that the consultant is an independent contractor. If that is the situation, the consultant should not be paid through the same payroll methods as the company’s employees, and employment deductions should not be made from the compensation.

5. INDEPENDENT CONTRACTOR STATUS. In making and performing this Agreement, the Consultant is acting at all times as an independent contractor. Neither party may make any commitment nor incur any charges or expenses on the other’s behalf. The Consultant is not an employee of the Company and is not entitled to participate in any pension plan, unemployment insurance, bonus, worker’s compensation insurance, stock, or similar benefits that the Company provides for its employees. The Consultant is responsible for performing the work under this Agreement in a skillful manner and will be liable for the consequences of his or her own acts and/or omissions, if any. The Consultant will be responsible for all payments of taxes, penalties, and/or other similar contributions that have arisen or may arise out of the Consultant’s services under this Agreement. The Consultant may engage assistants at his or her own expense, which assistants are also not employed by the Company. The Consultant will furnish all materials, tools, and equipment required to perform the consulting services. COMMENT: The legal presumption is that a person who is engaged by another party is an employee. If you want to engage an independent contractor, it is important to expressly negate this legal presumption. You should attempt to plug all the holes that would otherwise create an employment relationship. 6. CONSULTING REPORT. The Consultant will prepare and submit a report to the Company on the Consultant’s findings. The report must include the following information: [specify]. The Consultant will retain a duplicate copy of the report for at least six months after the termination of this Agreement. COMMENT: The company may specify the desired results of the consulting services without jeopardizing the independent contractor status of the consultant. Depending on the extent of the requirements, you may consider attaching a separate checklist as an addendum to this agreement.

7. CONFLICTS OF INTEREST. The Consultant warrants that he or she has no potential financial or other conflicts of interest in performing the consulting services, except those already disclosed to the Company. COMMENT: It is important that the consultant not have any conflicts of interest that will affect the objectivity of the consulting services. If the company later learns that there is a conflict of interest, the consultant will be in breach of this contract. 8. CONFIDENTIALITY. All information provided by the Company relating to the manufacture and sale of its products is provided in confidence, and the Consultant agrees not to disclose such information without the Company’s authorization.

9. INTELLECTUAL PROPERTY RIGHTS. The Company holds exclusive rights in the intellectual property connected with its goods and services. No transfer of these rights is being made to the Consultant. The Consultant covenants to protect the Company’s exclusive rights and to avoid infringing them.

10. TERMINATION. Either party may terminate this Agreement by giving written notice to the other party effective as of the date of mailing or the date stated in the notice, whichever is later. If the Consultant has partially performed the consulting services at the date of termination, the Consultant may submit to the Company the materials compiled up to that time with a statement of fees based on an hourly charge. For purposes of termination only, the parties agree that a reasonable hourly charge for the consulting services is [currency and amount]. COMMENT: Termination at will is common in service contracts with independent contractors because of the difficulty in forcing someone to perform services when they are unhappy. The right to terminate the contract should be mutual (both parties should have the same right). Thus, if the company is unhappy with the consultant, termination of employment may be made without justification. 11. ASSIGNMENTS. This Agreement is for the personal services of the Consultant, and therefore neither party may assign or delegate the rights and obligations without the prior written consent of the other. COMMENT: Generally, parties cannot completely prohibit assignments or delegations of the contract because such provisions are void at law. However, they may limit these rights by requiring advance consent to the assignment or delegation. In a contract for services, this limitation is particularly significant because of the personal nature of the agreement—that is, both parties have agreed to work with each other because they like and respect each other’s abilities, philosophies, personalities, work ethic, and so forth. 12. NOTICE. If either party gives a notice to the other under the terms of this Agreement, the notice will be effective only if it is in writing and delivered by certified or registered mail. Notices must be sent to a party at the address specified in this Agreement, unless the party has notified the other of a change of address.

13. GOVERNING LAW. This Agreement shall be considered as entered into and governed by the laws of [country].