Consultants, Product Builds and the Importance of a Written Agreement
You had a consultant build your product, but so far you’ve done everything under an oral agreement. The product is done, and you are ready to make the payment. While it may be tempting to take the quick and easy route of relying on the oral agreement, putting the agreement with your consultant in writing can save you from disagreements that may pop up down the road. Below are a couple reasons why you should memorialize your agreement in writing:
If you have already engaged a consultant but have not thought about these issues, it’s not too late to take steps to protect your company and your consultant. Next time though, you should consider having a consulting agreement in place before a consultant begins work. There’s an additional, practical reason to have a consulting agreement in place before the project is underway.
There are many other components of a consulting agreement and what is deemed most important may shift depending on your business, project and goals. Taking steps to think through the work involved and put your agreement in writing will help ensure that you clearly communicate your expectations and goals, agree on the terms and outcome, and give you a resource to turn to if questions arise.
- Protect your intellectual property. What kind of product did your consultant create? If your consultant produced anything that could be considered intellectual property, you’ll want to make sure you have the proper rights to be able to actually use the work product in your business. A consulting agreement can define whether you or the consultant has rights to the resulting intellectual property, the scope of such rights, and how each party can exercise those rights.
- Define your relationship. Misclassification is a frequent misstep in consultant relationships and can have significant consequences for both parties. A consulting agreement can help establish that the consultant you hired is in fact an independent contractor and thus is not entitled to employee benefits and is responsible for any associated taxes. Note that simply having an agreement that labels a worker as an independent contractor is not sufficient to establish a worker as an independent contractor and you should discuss with legal counsel language that can be included in the agreement to help support a claim of such status.
If you have already engaged a consultant but have not thought about these issues, it’s not too late to take steps to protect your company and your consultant. Next time though, you should consider having a consulting agreement in place before a consultant begins work. There’s an additional, practical reason to have a consulting agreement in place before the project is underway.
- Define the scope and terms of your project. A written agreement will help ensure you and your consultant are on the same page in terms of desired results, price and time frame for their services. Among other items, a consulting agreement should describe the services that the consultant is expected to provide, the agreed-upon payment terms, and the timeline of the project. For example, will your consultant be paid only when all work is complete or when certain milestones are reached?
There are many other components of a consulting agreement and what is deemed most important may shift depending on your business, project and goals. Taking steps to think through the work involved and put your agreement in writing will help ensure that you clearly communicate your expectations and goals, agree on the terms and outcome, and give you a resource to turn to if questions arise.