Why You Need a Written Agreement
You've just landed a consulting assignment at a terrific rate. Should you put your agreement in writing? Chances are, your new client will present you with a written contract. If so, should you sign the agreement? And what should you look for in the agreement?
The practice of hiring consultants in the corporate world is increasing and so is the practice of using written agreements to define the parameters of the working relationship. Here are some guidelines to help you initiate and maintain a satisfying partnership:
Help You Stay Profitable
A well-drafted agreement helps avoid future misunderstandings. Make sure you clearly define your responsibilities and your fees. If you are being paid a flat fee, for instance, you'll want to enumerate all your obligations to avoid doing additional work that will cost you time and money. For example, a computer software developer working as a consultant would use a written agreement to limit his work to software development and specifically exclude other work, such as program testing.
Define How and When You Get Paid
Many consultants negotiate a standard up-front retainer and specify a timetable for being paid. If the consultant is not paid on time, the work does not proceed. Specifically defined payment arrangements ensure that your client understands when payment is due and ensure that you, the consultant, are paid for your work in a timely manner.
Help Avoid Costly Litigation
Include a clause addressing how any future disputes should be handled, saving you and your client lawyers' fees and court costs.
Clarify Ownership of Intellectual Property
You may be entitled to ownership of copyrights and patents for your efforts. As an employee, the ownership of any copyrights or patents on work that you create usually belongs to your employer. Not so as a consultant; the consultant usually retains the ownership of intellectual property for work that the consultant develops. This is good news. For example, if you developed software, you can use it again and charge more for less work, because you have already developed the tool that you own. A written agreement is essential in clarifying your rights to intellectual property.
Finally, have the agreement reviewed by a lawyer before you use it. If you seriously want to engage in consulting work, a well-drafted written agreement is a worthwhile expense. There are many free forms on the Internet that can help you create a first draft. Once you have a written draft, bring it to a business lawyer to review and finalize the document. The best part? You can use your form agreement many times in the future.