Beware the pitfalls of clients retaining consultants

When asked to draft an agreement to secure consultancy services for a client, one challenge is how to ensure maximum protection for the client. As often as not, they have agreed terms in principle with an individual only to
find that, when discussions turned to the formalities, the consultant operates through
a limited liability company.

This throws up a number of issues for the practitioner, who may well be aware of IR35 (which deals specifically with tax and the managed service company regime) but who may focus on that and fail to adequately address other aspects.

So, what are the key drafting aspects to keep in mind?
 

Clarify expectations
On numerous occasions, disputes arise over the enforcement consultancies simply because of the mismatch of expectations against performance, especially in ‘soft consultancy’ such as web marketing or search engine optimisation. Ensure that a detailed specification is annexed to the consultancy agreement setting out exactly what services are to be performed and what milestones can be agreed on to monitor both the performance and quality of service.

It’s not just the consultant’s obligations that need to be addressed when drafting this provision in the contract. Disputes often arise because the client who has retained the consultant simply fails to provide them with adequate data or other resources
they need.

Also, keep in mind the extent to which the consultant is to be permitted to negotiate and conclude contracts on behalf
of the client, which could otherwise fall foul of the Commercial Agents (Council Directive) Regulations 1993.

Establish service provider

Should one key individual be made available on secondment to address any particular issue and who will direct them? Take a warranty that the consultancy has adequate resources to
make key staff available throughout the contract, otherwise ensure the client
is aware of substitution risk.

For any long-term secondment of specified personnel or where the contract provides for the supply of an individual, take particular care to ensure that all the usual tests to demonstrate that the relationship of an independent contractor are satisfied so that there is no chance of ‘worker’ or ‘employee’ status being created

Agree fee structure

Have the parties agreed whether there is to be a fixed fee payable per month or are fees to be linked to either hours, performance or targets? If the latter, should it be linked back to those milestones?