Monday, January 12, 2009

Framework of Consulting Contracts and Agreements. Guidelines for Establishing Ground Rules between Consultant and Client.


Framework of the Consulting Contract

Here are the main components in a contract between the client and the consultant:

The definition clause (or interpretation clause). This clause serves two main functions: to define the meaning attached to key words and phrases that appear throughout the contract, and to ensure that the same meaning is attached to those words or phrases throughout the contract. Typically, the definition clause states that “The following words or phrases that appear in this agreement bear the meaning assigned to them in this section:
‘The Consultant’ means Skillsoft Consulting LLC
‘The Client’ means the Government of the United States
‘The Department’ means the Department of Health
‘The parties' means the parties to this agreement
‘The Consulting Services Agreement’ or
‘CSA’ means the Consulting Services Agreement annexed hereto as Schedule A.”

Warranties. Contracts are usually awarded to consultants on the basis of their skill, qualifications, knowledge, and general knowhow, usually as a result of representations made by the consultant that he/she is qualified to perform the assignment. It's always a good idea to include a clause in the agreement in which the consultant warrants his or her abilities to perform the task. Such a clause could state the following:
WARRANTIES: The consultant warrants that he or she has the requisite experience, knowledge, stated professional certifications, and skill to perform the assignment as set out in the Consulting Services Agreement. This warranty constitutes a material representation of fact, which induced the organization to award the contract to the consultant.
If it becomes apparent later that the consultant is incapable of performing the assignment as required or has falsely represented any credentials, the contract can be terminated on the basis of misrepresentation.

The duration of the contract. The agreement should specify both the commencement date and the termination date of the contract. It can also state that the contract may be extended by a further period (for example, six months) by agreement in writing and signed by both parties. Unless the contract is extended by agreement between the parties, it terminates on the termination date.

Duties of the client organization. The client organization that hires the consultant has a duty to provide the consultant with assistance reasonably required for the completion of the assignment, including all information, diagrams, reports, or contracts that are relevant to the completion of the assignment.

Duties of the consultant. The duties of the consultant should include but are not limited to the following:
? Reporting. The consultant should be required to provide a comprehensive report on the assignment by a specific date. The clause should state how the report is to be arranged (including the main headings), how recommendations are to be set out, financial evaluation, and so on. The report that the consultant produces is a fundamental aspect of his or her service delivery, as it lays the basis for far-reaching decisions made by the client organization. You must therefore be clear as to what you hope to achieve with the report, and you should insist on clarity and conciseness in the drafting of the report.
? Records. The consultant should be required to keep records of all expenses and accounts, and to make these available to the client upon request.
? Confidentiality. The consultant should treat as confidential any information supplied to him or her by the client organization or that is otherwise obtained in connection with the agreement. Furthermore, the report that the consultant is required to draft should be confidential; the consultant should not publish or discuss any aspect of the report, or any information that he or she acquires as a result of the contract, unless this is done with the written permission of the client.

Payment. The payment clause should explain how and when payments will be made. The payment clause should also make provision for the payment of expenses (travel, accommodation, etc.) upon presentation of original invoices and receipts.

Intellectual property. This clause should state that all intellectual property rights obtained by the consultant in connection with the agreement belong to your organization, that all documents prepared by the consultant are the exclusive property of the client organization, and that the consultant may only use them for purposes unrelated to the agreement with the written consent of the client.

Indemnity. This clause should stipulate that your organization shall not in any way be liable for any damage or losses suffered by any person arising out of any act or omission of your consultant. This clause serves to protect your organization if your consultant (knowingly or not) violates any laws or breaches any of the rights of third parties in performing his or her duties.

Subcontracting. This clause should specify that the consultant may not subcontract any aspect of the assignment to third parties without the written consent of the client organization; that written consent to allow subcontracting will in no way discharge the consultant of any obligation in terms of the agreement; and that the third party (subcontractor) will not have any claim against your organization arising out of the agreement between himself or herself and the consultant.

Training and development. The agreement may specify that the consultant shall provide training for the client organization's employees assigned to him or her in areas identified by the organization and that arise from the delivery of services in accordance with the agreement. This clause will facilitate skills transfer between the consultant and your organization, thus increasing your own team's capacity to undertake similar assignments in the future.

Termination of the agreement. This clause can stipulate that either party may terminate the agreement in the event of a material breach by the other party or by giving one month's written notice of his or her intention to do so.

Penalty clause. This clause introduces a penalty for failure to deliver the required service in a timely manner. For example, the penalty might take the form of a deduction of a percentage of the amount payable for every day that the service is overdue.

Resolution of disputes. This clause should stipulate that any dispute arising from the agreement should be settled through a process of mediation. Should the mediation process prove to be unsuccessful, the matter should be referred to arbitration.

Appendices. The consulting contract can contain several appendices. Appendices should always be clearly marked as Appendix A, B, C, and so on. Appendices should be referred to and explained in the body of the contract itself. Appendices that are attached without explanation create confusion about their relevance. Reference to an appendix should be made in the following way: "The consultant agrees to conduct interviews with managers in the department listed in Appendix A to this agreement." Appendices are not separate documents from the consulting contract; rather, they form an integral component of the contract. Thus, failure to comply with requirements, specifications, or conditions listed in an appendix can be regarded as a breach of contract.

Ground Rules for Consultant and Client
? Test assumptions and inferences.
? Share all relevant information.
? Focus on interests, not positions.
? Be specific—use examples.
? Focus on issues, not personalities.
? Agree on what important words mean.
? Explain the reasons behind one's statements, questions, and actions.
? Disagree openly and with respect (no hidden agendas).
? Make statements, then invite questions and comments.
? Jointly design ways to test disagreements and solutions.
? Discuss "undiscussable" issues.
? Clarify and refine expectations on both sides.
? Keep the discussion focused.
? Do not take cheap shots.
? All members are expected to participate in all phases of the process.
? Exchange relevant information with all interested parties. Make decisions by consensus.
? Do frequent self-critiques and debriefs.
? Keep what's shared confidential.
? Show up to meetings on time.
? Listen actively and respect others when they are talking.
? Be conscious of body language and nonverbal responses. They can be as disrespectful as words.

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