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What is a Consultancy Agreement?

A consultancy agreement is an agreement that an organization/employer enters into with his/her consultant. This agreement governs the relationship between the consultant and the employer and it enumerates various terms of their relationship, such as deliverables, timelines, compensation, roles and responsibilities, etc.

How It Works

Consultancy Agreement

A consultancy agreement is an agreement that an organisation/employer enters into with his/her consultant. This agreement governs the relationship between the consultant and the employer and it enumerates various terms of their relationship, such as deliverables, timelines, compensation, roles and responsibilities, etc.

From a business point of view, entering into a Consultancy Agreement is important.
It helps define the scope of work for the consultant.
It places obligations on the consultant, such as confidentiality.
It includes exclusivity requirements.
It covers indemnification obligations.
It includes non-competition restrictions.

Contents of a Consultancy Agreement

A well drafted Consultancy Agreement addresses the following:

What is the job description and what are the duties of the consultant?
What is deliverable expected/required from the consultant?
What is the compensation structure?
What is the term of consultancy? Is there any lock-in period?
Is there an exclusivity required t be offered by the consultant?
Are there any leave entitlements?
How can the consultancy be terminated? What is the notice period?
How would the intellectual property in the work done by the consultant during the course of his/her arrangement be treated?
Is there any non-compete and non-solicit restriction?

Laws governing the Consultancy Agreement in India

The different laws which govern various aspects of Consultancy Agreement in India are as follows:

The Indian Contract Act, 1872
Shops & Commercial Establishment Act (State-wise)
Industrial Relations Code, 2020
Code on Social Security, 2020
Code on Wages, 2019
Arbitration and Conciliation Act, 1996
Copyright Act, 1957
The Trademarks Act, 1999
Patent Act, 1970
Design Act, 2000

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Frequently Asked Question

A consultant is not an employee of the organisation. He/she is normally a professional who is offering services as per the scope of her/his assignment. A consultant may render services as an individual or as a firm or even as a corporate entity. As an employee, one is bound by the rules of the organisation concerning employment, such as leave, attendance and working conditions. This is not the case in case of a consultant. "Consultant" position also does not entitle the person to the legal rights of the employment nor entitles him to the rights of an employee (such as PF, gratuity etc).

There are certain benefits that an organisation enjoys when it hires a person as a consultant, rather than an employee. Some of those benefits include:- ● The organisation is not bound to comply with labour laws related to an employee's PF, Gratuity and other terminal benefits on retirement or resignation. ● Flat 10% Tax will be deducted by the organisation on every payment it makes to the consultant as against for employees, where appropriate tax as per their income tax slab is deducted. ● You can discuss deliverables with the consultant you plan to hire and only pay on completion of the task. ● Since contractors are not technically employees of your company, it gives your greater flexibility to control the conditions of their work and remuneration. ● Again, since consultants aren't technically employees, your company does not bear full responsibility for their actions on the job. ● The organisation has to ensure lesser compliances in terms of consultant, than what it has to do in case of employees.

A Consultancy Agreement provides clarity to both the parties, i.e. an employer and the consultant, as to the exact expectations of the job, compensation structure, deliverables, timelines, termination mechanism, besides other important terms. This kind of clarity helps to prevent disputes between the parties, and if in case there is a dispute, the consultancy contract acts as an evidence of the arrangement mutually agreed to between both the parties.

No, it is not mandatory. However, even though there is no law that mandates it, it is however very important to enter into such an agreement, in order to provide clarity to the both the parties as to the exact expectations of the job, compensation, deliverables, timelines, termination mechanism, besides other important terms. This kind of clarity helps to prevent disputes between the parties, and if in case there is a dispute, the consultancy contract acts as an evidence of employment arrangement agreed to between both the parties.

What our users have to say

We hired a business consultant on a handshake deal, which later led to disputes over deliverables. Lawyaar drafted a Consultancy Agreement clearly defining scope, timelines, and outcomes. It set expectations and avoided further conflicts.

Rajeev Malhotra, Gurugram

A consultant demanded payment even though work milestones were not met. Lawyaar created a Consultancy Agreement with milestone-based payments and performance clauses. It protected our interests legally.

Shalini Mehta, Ahmedabad

We were engaging an industry expert short-term and needed clarity on confidentiality. Lawyaar included strong confidentiality and non-disclosure clauses in the Consultancy Agreement. It safeguarded our sensitive business data.

Faizal Ahmed, Kozhikode

Our consultant started offering similar services to competitors. Lawyaar drafted a Consultancy Agreement with non-compete and conflict-of-interest clauses. It prevented future business harm.

Kunal Arora, Faridabad

We were unsure whether consultants owned the IP created during the engagement. Lawyaar included IP ownership and assignment clauses in the Consultancy Agreement. It legally secured all work output for us.

Sneha Patil, Kolhapur

We were onboarding multiple consultants and needed a standard contract. Lawyaar drafted a reusable Consultancy Agreement template aligned with Indian laws. It saved time and ensured consistency.

Ramesh Iyer, Madurai

A consultant abruptly exited the project, leaving work incomplete. Lawyaar included termination and handover clauses in the Consultancy Agreement. It ensured continuity of work.

Anupam Ghosh, Siliguri

Our finance team needed clarity on tax responsibilities for consultants. Lawyaar structured the Consultancy Agreement clearly distinguishing consultant status from employment and addressing tax obligations. It reduced compliance confusion.

Pooja Jain, Udaipur

During an audit, we were asked to justify consultant engagements legally. Lawyaar drafted a compliant Consultancy Agreement that clearly defined independent contractor status. It helped us clear the audit smoothly.

Sanjay Kulkarni, Akola

We wanted to engage a consultant for strategy without long-term commitment. Lawyaar drafted a flexible Consultancy Agreement with defined tenure and exit clauses. It gave us legal clarity without rigidity.

Nisha Verma, Patna

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Contents of a Consultancy Agreement

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What our users have to say

Rajeev Malhotra, Gurugram

Shalini Mehta, Ahmedabad

Faizal Ahmed, Kozhikode

Kunal Arora, Faridabad

Sneha Patil, Kolhapur

Ramesh Iyer, Madurai

Anupam Ghosh, Siliguri

Pooja Jain, Udaipur

Sanjay Kulkarni, Akola

Nisha Verma, Patna

Startup Documents

Consultancy Agreement

₹7999

Deliverables *

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Consultancy Agreement

256 People purchased

What is a Consultancy Agreement?

How It Works

Consultancy Agreement

Contents of a Consultancy Agreement

Laws governing the Consultancy Agreement in India

Why Lawyaar?

Frequently Asked Question

What is the difference between a consultant and an employee?

What are some of the benefits for an organisation of hiring a consultant over an employee?

What is the importance of a Consultancy Agreement?

Is it mandatory for me to enter into a Consultancy Agreement with my consultants?

What our users have to say

Rajeev Malhotra, Gurugram

Shalini Mehta, Ahmedabad

Faizal Ahmed, Kozhikode

Kunal Arora, Faridabad

Sneha Patil, Kolhapur

Ramesh Iyer, Madurai

Anupam Ghosh, Siliguri

Pooja Jain, Udaipur

Sanjay Kulkarni, Akola

Nisha Verma, Patna

Startup Documents

Consultancy Agreement

₹7999

Deliverables *

Recommended Products

Limited Liability Partnership

₹12999

One Person Company

₹12999

Limited Liability Partnership

₹12999

One Person Company

₹12999