The consulting agreement: What each party expects

After a client accepts a proposal from you, your
next step is to develop an agreement that formalizes your relationship with
that client. You should never start work for a company without such an
agreement in place. First and foremost, the agreement ensures that a
business relationship really exists. An agreement can prevent
misunderstandings later, and it will significantly increase the likelihood
that you will be paid in a timely fashion.

The only substitute for
a written agreement that I accept from established companies is a purchase
order (PO) issued by the purchasing department. If you go this route, make
sure that the document you receive really is a PO and not a purchase
request; the latter is only an internal form that precedes the issuing of
an actual PO. When working with larger companies, you may wish to go beyond
an agreement and PO and request to be listed in the corporate database as a
vendor. Find out what is required by the company. Often, the company's
accounting department will have more accurate information than your hiring
manager.

There are two main scenarios for the agreement itself. In
the first, which generally applies to dealings with smaller clients, you
will write the agreement. When I'm working with a client who has no
standard agreement, I generally offer to develop a simple letter agreement.
This consists of a letter to the client describing the work to be done, the
deliverables and time frame, the amount I will be paid, the date I will
send an invoice, and the length of time after invoicing within which the
client must pay me. I send two signed originals with a place for the client
to sign indicating agreement to the terms, and ask for one fully executed
original to be mailed back to me. I may execute this agreement by fax if I
trust the client.

In the more likely scenario, the client will have
a standard consulting or contracting agreement. If this is the case, you
will generally have little choice but to use this agreement. These are
long, comprehensive documents, and you should read them carefully to avoid
surprises. The biggest threat is a non-compete clause, as sometimes these
are extremely restrictive. I usually negotiate to remove this clause
entirely; if I can't do that, at most I agree not to do an identical
project for a direct competitor in the course of my relationship with my
client and for a six-month period afterwards.

In addition, some
companies will require you to have general liability for personal injury
and property protection. These policies, as opposed to professional
liability policies, are not expensive, and it may be easier to have the
coverage than to argue the requirement. The one clause I ask to have added,
as it always seems to be missing, is a set time period after my invoice
date within which the company needs to pay me. I generally ask for 30
days.

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