For any consultant, having a strong and comprehensive standard form contract is not just a good practice — it is essential. No matter the size of the business, establishing a clear, enforceable agreement can help define expectations, protect a consultant’s interests, and ensure that the scope of work is well understood by all parties. Though clients may not always accept the consultant’s form or all of the provisions contained within, there are many situations where it can be utilized — particularly if the consultant holds significant negotiating leverage in the relationship.

Beginning with the consultant’s form is advantageous to the consultant because its terms are fully within the consultant’s control. During negotiations, clients will often seek changes, chiseling away at those terms, but starting from a consultant-friendly position sets an “anchor” that consultants can hold to and that clients may be reluctant to depart from completely. Even when a client insists on using its own form, the consultant’s version serves as a valuable reference point. It can highlight key differences in terms, identify provisions that may be missing from the client’s contract, or help spot extraneous items in the client’s form that warrant closer scrutiny.

Another benefit of maintaining a strong form is that after a sufficient number of agreements have been entered into with clients, it becomes clear which provisions are the most heavily negotiated. The consultant can identify which provisions are most important to clients where the consultant is more (or less) willing to give ground. Such information can help prepare the consultant for future negotiations or refine the form.

This article is intended to serve as a resource for consultants negotiating the terms of client relationships. It outlines key considerations for their contracts, highlighting legal and business risks that frequently arise and best practices for mitigating them.

Structuring the Consultant’s Agreement

Typically, consultants use a “blanket” or master agreement containing the general terms and conditions that govern the entire client relationship. This agreement is then supplemented by project-specific documents — such as statements of work (SOWs), purchase orders, or requests for services — that define the details of individual assignments. The master agreement usually contains broader provisions that do not change from project to project, such as payment terms, liability limitations, governing law, and dispute resolution mechanisms. Project-specific details — such as price, scope of work, deliverables, and deadlines — are then outlined in the SOWs.

Having a form need not pigeonhole the consultant to a specific type of client or service. Master agreement forms commonly include certain bracketed provisions that either are or are not included in final client proposals based on factors such as the nature of the client (e.g., government entity vs. non-government entity, individual client vs. entity client, etc.) or the nature of the services to be provided. Utilizing bracketed provisions rather than entirely separate forms helps keep the core of the form the same regardless of variable factors.

Addressing every single component of a consultant’s agreement goes beyond the scope of this guide, but some key areas — especially liability limitations — are particularly important and merit deeper discussion.

The Importance of Liability Limitations

One of the most critical considerations for establishing a consulting business is limitation of liability. Consultants should always consider forming a limited liability entity (for example, a limited liability company (LLC) or corporation), which helps distinguish them as professional independent contractors and shields their personal assets from claims related to the business. A limited liability entity can be beneficial for both sole proprietors and consultants with partners by containing the risk of liability within the business itself.

However, it is crucial to recognize that personal negligence is generally not covered by the protections of an LLC or corporation. For example, if a consultant makes a significant mistake while working on a client’s project (such as a coding error that results in financial losses), the consultant still could be personally liable unless there is a specific waiver of personal liability in an applicable contract that is enforceable under applicable law. Therefore, contractual provisions that limit the client’s recovery to the business, and not the individual consultant, are essential for protecting personal assets such as homes and financial accounts. These provisions might include, for example, a specific cap on the consultant’s liability (commonly expressed as a multiple of fees), a waiver of “consequential” damages caused indirectly by consultant actions, a time period after which contract claims expire, and covenants not to sue individuals associated with the consultant entity personally.

Ownership of Deliverables and Intellectual Property

Another essential aspect to consider in a consultant’s agreement is the ownership of deliverables. Whether the items are created by the consultant, the client, or are co-developed works, clearly outlining who owns any intellectual property (IP) will avoid potential disputes. Many consultants and clients fail to understand fully how IP law default rules work in this context. Though there are circumstances where deliverables may qualify as “work for hire” and thus ownership of them automatically transfers to the client, this result is not always obtained — particularly for consultants who are not employees (whose work is assigned to their employer by default).

Unless specifically outlined in a contract, the creator of a work typically owns any IP the creator develops, even if a client has paid for the deliverable. This documentation requirement can lead to significant disputes if ownership and rights to use the deliverables are not addressed upfront. Thus, it is vital that the contract clearly specify whether the consultant retains ownership of the deliverable or transfers it to the client and, if so, under what terms. Otherwise, the consultant may unintentionally retain rights that the client expects to own, which could sour the business relationship and even lead to litigation.

Parties to consultant contracts commonly license IP to ensure that they are able to obtain the full benefit of their bargain. In such a case, the consultant can retain IP ownership but provide a non-exclusive license to the client allowing use only. Retaining ownership of created IP and granting client licenses can help consultants utilize the same or similar IP for multiple clients, which is often not permitted if ownership of such IP is granted to the initial client.

Managing Scope Changes

Contracts can also help ensure that consultants control their obligations. Defining the scope of work initially is one thing, but managing changes in scope is equally critical. Consultants should ensure that any change in scope or any other change to the contract must be made in writing and signed by both parties. This process minimizes the risk of misunderstandings or “selective memories” about verbal agreements made during the project. Verbal promises or informal agreements can be difficult to enforce and may lead to disputes down the line, no matter how friendly and aligned the parties are at the time of the verbal agreement.

Additionally, some legal precedents suggest that a contract’s terms can be modified based on the course of conduct between the parties, even without formal documentation. Therefore, consultants should strictly adhere to formal processes for contract modifications and make sure these are clearly documented. It also helps to frame this process as beneficial for the client, particularly if there are changes in personnel who may not be privy to earlier discussions. This approach ensures continuity and transparency, safeguarding both parties from future disputes.

Prioritizing the Consultant’s Terms Over Client Terms

Another critical provision in a consultant’s agreement is ensuring that the consultant’s terms take precedence over any conflicting terms that the client may attempt to impose through its standard forms, such as purchase orders or other documentation. This so-called “battle of the forms” is a common issue in the sale of goods under the Uniform Commercial Code (UCC), but a similar concept can also arise in consulting contracts. To avoid any confusion or disputes, it is crucial that the consultant’s agreement clearly states that, to the extent the consultant’s terms apply, they will govern the relationship and control over any conflicting client terms. This provision reduces a consultant’s risk of being inadvertently bound by unfavorable terms included in client paperwork.

Indemnification Provisions

One of the more complex and potentially contentious sections of a consultant’s agreement is indemnification. Indemnification clauses specify who will be responsible for damages if something goes wrong. Should indemnification be mutual (protecting both parties) or unilateral (only protecting one party)? There are many variations of indemnification, and consultants should carefully consider what is being covered. Indemnification may include protection against direct claims (those between the consultant and the client) or extend to third-party claims where a third party sues one party because of the acts of the other. Consultants should resist requirements to provide indemnification for direct claims by clients because they may have no defenses if damages arise. Instead, they should try to argue that breach of contract actions suffice to protect the client.

It is also important to consider what types of losses are covered — whether indemnification includes only damages from breach of contract or extends to broader risks such as IP infringement, negligence, or even any act or omission by the consultant or client. Does the indemnification provision survive after the contract ends, and if so, for how long? These are important issues to address, and insurance coverage must also be factored into the decision-making process. Consultants should ensure insurance counsel or an insurance agent reviews their indemnification terms, as policies may not always cover obligations assumed by the contract, leaving the consultant exposed.

Warranties and Force Majeure Clauses

Warranties are another area that requires careful attention. If a consultant provides any warranty for services, it should be clearly defined in the contract. In many cases, consultants will want to provide services on an “as-is” basis, including a waiver of any implied warranties. This waiver may need to be conspicuous to meet legal requirements, including, for instance, ALL CAPS and/or bolded font. If a warranty is provided, the agreement should specify how long the warranty lasts and under what conditions it may be terminated, especially if the client undergoes a change in control or ownership.

Finally, as the COVID-19 pandemic has highlighted, force majeure provisions are critical. These provisions excuse the consultant’s obligations in the event of unforeseen circumstances, such as natural disasters, strikes, pandemics, or other events outside of the consultant’s control. However, it should be made clear that though the consultant’s obligations may be excused, the client’s payment obligations are not excused if work has already been performed.

Protecting Confidentiality Through Alternative Dispute Resolution

Disputes are an unfortunate reality in business relationships, but how they are resolved can significantly impact a consultant’s reputation and financial well-being. Traditional litigation is often a public process, which means that any disputes, including allegations or claims made by a client, can become part of the public record. For consultants who rely on their professional reputation to secure future work, public disputes can be damaging, even if the consultant ultimately prevails in court.

To mitigate these risks, consultants should strongly consider including an arbitration or alternative dispute resolution (ADR) provision in their agreements. Arbitration allows disputes to be handled in a private, confidential forum, shielding both parties from unnecessary exposure. Additionally, arbitration can be a more efficient and cost-effective process than traditional litigation. However, it is crucial for consultants to carefully negotiate arbitration provisions to ensure fairness, including selecting a reputable arbitration body — such as the American Arbitration Association or JAMS — and outlining clear procedures for resolving disputes.

Termination Rights: Knowing When to Walk Away

Another critical consideration for consultants is the ability to terminate an agreement when circumstances change. Many consultants focus on securing business, but they should also ensure they have an exit strategy if the client relationship becomes problematic. A well-drafted termination provision allows consultants to end engagements that become untenable due to ethical concerns, non-payment, or unforeseen risks.

Consultants should consider including a termination-for-convenience clause, which allows them to exit the agreement with prior written notice, typically within a reasonable period (e.g., 30 days). This flexibility ensures that the consultant is not trapped in an engagement that no longer aligns with their business goals. Additionally, consultants should incorporate termination rights if:

1. The client fails to make timely payments.
2. The client engages in illegal or unethical conduct that could implicate the consultant.
3. The consultant determines that continuing the engagement presents a legal, financial, or reputational risk that was not foreseeable at the outset.

By having clear termination provisions, consultants can avoid being entangled in risky or non-profitable engagements. Without these protections, they may be forced to continue providing services under undesirable conditions, which could ultimately harm their business and reputation.

Conclusion

A well-drafted consultant’s agreement is a vital tool for managing risk, managing the consultant’s business, and ensuring a successful consultant-client relationship. From limiting liability and damages to clearly defining the scope of work, IP ownership, and indemnification, these provisions help protect both the consultant’s business and personal assets. While some portions of the contract may seem complex, the key is to get the fundamentals right. With a proactive approach, consultants can focus on delivering value to their clients without being exposed to unnecessary legal and financial risks.