Consultancy Agreements: The Importance of a Clear Scope

Consultants can be extremely valuable to businesses by providing specialised expertise, skills, and an outside perspective that may be lacking internally. However, given how involved consultants often become in handling sensitive company information and intellectual property, having a proper consultancy agreement in place is critical. In particular, ensuring the agreement has a well-defined scope helps avoid major pitfalls down the road in terms of ownership rights, deliverables, timelines, and payment terms.

What Does “Scope” Refer to in a Consultancy Agreement?

The scope sets out the parameters and expectations for the engagement. This includes:

• The specific services or tasks the consultant will perform
• Any deliverables to be provided and timeframes
• How intellectual property rights will be handled
• Payment amount, structure, milestones and terms
• Limits on the consultant’s ability to subcontract work

Without clearly delineating these details upfront, there is ample room for confusion and disputes between the parties. The scope provides clarity for both consultant and client on what the project entails.

Why the Scope Matters

A vague or ambiguous scope introduces risk on multiple fronts:

• Ownership of any IP created may become contentious
• Expectations for deliverables and timelines can diverge
• Payment conflicts can arise more easily
• Consultants may subcontract parts or all of the work without approval

Conversely, an accurate, detailed scope:

• Establishes clear IP ownership rights
• Avoids ambiguity around deliverables and schedules
• Allows appropriate payment terms to be set
• Prevents unapproved subcontracting

Having these parameters defined upfront is crucial to avoiding misunderstandings. The scope sets expectations, allocates risk, and provides a roadmap for the engagement.

Drafting a Clear Scope

If you are engaging a consultant or providing consultancy services, it is strongly recommended a professionally drafted written agreement is put in place to confirm the remits of the arrangement.

When determining the scope of the arrangement:

• Be specific on the services, deliverables and timeframes
• Expressly state who will own any IP produced by the consultant as part of their role
• Include payment amount, structure, milestones
• Limit subcontracting of the consultant’s work without consent
• Permit changes through a variation clause (with written approval)

 For consultancy agreements, the scope provides critical definition for the engagement. Therefore, you should invest in drafting a detailed agreement and scope to prevent disputes down the road. Both consultant and client should agree on the parameters and expectations set out. With a clear scope in place, consultancy engagements can provide immense value to a business.

Get in touch if you would like to discuss consultancy agreements with us. We can draft and review consultancy agreements as well as provide personalised advice on your arrangement.