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Learn more about Consulting Agreement in Malaysia

Consultants seek to give a service to businesses looking to expand their operations. Strategy consulting, information system consulting, marketing, human resources consulting, and finance consulting are all part of the consulting market. Thus, the aim of a consultant is to conduct an in-depth investigation of a client’s problem or project. The consultant then makes recommendations to assist the customer solve his problem or complete his assignment successfully. This element of the mission is frequently critical for the client, and the Consultant accepts responsibility for it. As a result, it is critical to construct a consulting agreement that precisely describes the components’ commitments. In exchange for remuneration, use a Consulting Agreement to deliver services or advice in a certain area such as marketing, human resources, engineering, and so on to a client.

Table of contents


What is a Consulting Agreement?

This agreement is useful if you or your organisation intends to hire an outside consultant to work on a specific task or project for your firm. A consultant is often a subject matter expert who will assist in offering specific solutions for a limited time.

The agreement must be guaranteed by a formal contract laying out fundamental and detailed basis for future collaboration in the best interests of both the organisation and the consultant. The consultancy agreement will not only protect your rights in terms of data privacy and intellectual property, but it will also serve as proof in the event of a disagreement or lawsuit.

Is Consultancy Agreement important in India?

A Consultancy Agreement for services is required anytime a company or corporation hires consultants or undertakes any project.

Firms or corporations may take up work in an area or subject with which they are unfamiliar.
In such circumstances, rather of hiring a large number of specialists in the industry, businesses choose to hire a consulting firm. Such consultants have specialized knowledge in a certain field and may assist the organisation with short-term assignments. This not only helps the organisation save money in the long run, but it also allows them to work on more diverse projects.
In such instances, they may engage into a consultant agreement to guarantee that both parties’ best interests are fulfilled. As it binds both parties through a formal contract, such a consultant agreement for services ensures that there is no misinterpretation or dishonesty on either side.

What is included in the Consultant Agreement?

1. Scope of work: The consultation agreement explicitly defines the consultant’s tasks, obligations, and services. In general, work techniques are not specified. In conducting such job, the consultant has complete discretion.

2. Term: The contract specifies the time frame during which the firm need the consultant’s services.

3. Payment conditions comprise the amount of compensation to be paid to the consultant, the frequency of payment (monthly, quarterly, etc.), and the form of payment. In addition, all out-of-pocket fees will be specified in the agreement.

4. Confidentiality: Except for material previously known to the general public, the consultant is required to keep corporate information secret.

5. Termination: The agreement defines the ability of any party to terminate the contract and the requisite notice time.

Both the firm and the consultant gain from a Consulting Arrangement. It encompasses all parts of the jobs that must be completed within the specified time frames. The agreement helps to minimize misunderstandings on both the consultant’s and the company’s parts. In the case of a dispute between the consultant and the firm, it also functions as a legal document.

Why use a consultant for your business?

Many undertakings need the use of specialised expertise. It is suggested in such instances to contact a specialist to assist with their expert services. This is suitable when the need is transitory and the business does not want to assign a permanent staff to the assignment. In summary, the following are the conditions in which hiring a consultant is preferable:

➤ When the demand is only transitory. When the demand is event-based or for a specific time period, it is best to employ a consultant for that time period or until the event occurs
➤ Expert Opinion: Because the consultant works in their specialised sector, they have in-depth expertise as a result of substantial research on their part. They have specific expertise and hence give professional guidance and flawless results for the challenges or tasks entrusted to them
➤ Critical analysis is necessary: If a critical and unbiased examination of the business is required, consultants are the ideal answer. They give unbiased reports and analyses since they have no personal or business relationships with the company. Such unbiased feedback might be constructively critical for the company
➤ Allows for flexibility: The consultants are not full-time employees of the organisation. They can be appointed for a certain length of time, with their reappointment determined following an evaluation of their work. This gives the organisation the freedom to select the expert most suited to their needs
➤ It is also less expensive: Hiring a consultant is less expensive than hiring a full-time employee. Because no employment benefits are necessary

What to consider before signing a Consulting Contract?

Make sure you read the consultant agreement for services, correct any errors, and clear up any confusions. Allow your lawyer to go over the contract with you and clarify each clause so that you properly understand it. You must ensure that the agreement is properly understood so that both you and the employer have the same expectations for your job.

Do not presume that raising concerns about certain portions or terms in the agreement would irritate or bother the firm. Such fear should not prevent you from speaking up about issues with which you are unhappy in the contract.
All businesses understand how negotiations operate and would gladly go through the terms with you if you ask for assistance. Use the Consultant Agreement to outline your connection with the company and ensure that everything is in order. This will not only prevent future disagreements, but it will also make the process more smoother and more beneficial for all parties.
If you work for a consulting firm, ensure that the agreement does not contradict any of your employer’s rules. Because most organisations have regulations in place prohibiting conflicts of interest or commitment, be sure your contract does not violate any of their policies.

Also, review the confidentiality agreement to ensure that you understand what is expected of you.
Similarly, ensure that the agreement covers your rights as well as your Internet Privacy and data concerns.
If you don’t comprehend all of the contract’s provisions, get legal advice. It is usually preferable to resolve issues as they emerge rather than afterwards. Furthermore, there may be flaws in the agreement that you are unaware of that an expert lawyer can raise. As a result, you will be able to safeguard your best interests more effectively.

What if the consultant breaches the agreement?

1. Liquidated Damages and Penalties

The parties can include a clause that quantifies the Consultant’s liability to pay damages to the Client if the Consultant violates any of the agreement’s terms and conditions, resulting in financial loss to the Client. This condition is especially advantageous to the Consultant if the responsibility is specifically restricted, for example, the obligation shall not exceed the whole value of payment specified in the agreement.
Several common methods of enforcing penalties are:

➤ Each time the Consultant raises an invoice, the Client can withhold 5% of the payment as security, and the accumulation of this security will be released upon termination of the agreement without any breach by the Consultant
➤ If the Consultant violates any of the terms, the Client may refuse to deliver the security deposit
➤ If the Consultant is late in delivering deliverables, the Consultant may be penalised 0.001 percent of the Agreement value for each day of delay

2. Suspension of Contract

When there is a scope of rectification of the Consultant’s breach, the Customer can issue a notice of suspension to the Customer, explicitly stating the breach and the time within which the Consultant must rectify it.

3. Termination of Agreement

This Clause will describe the circumstances under which the Client may terminate the agreement and the circumstances under which the Consultant may terminate the agreement, as well as the consequences of termination.

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