Overview of Consulting Agreement


What is this document?

A Consulting Agreement (also known as a Contractor Agreement) is used to establish the terms and conditions of the service relationship between a company and an individual or another company.  A Consulting Agreement will describe the services the consultant will provide and the specific nature of the relationship between the consultant and the company. A consultant or contractor is often treated differently in terms of hours and benefits than an employee of the company.


When would I use this document?

This document can be used when a business wants to use the services of another person or company, but does not want to formally hire the person as an employee. This document can make it clear what services and obligations exist between the company and the contractor.


Who signs this document?

Consulting Agreements are signed by the prospective or existing contractor and an authorized representative of the company (usually an officer or director of the corporation).


More details about this document

Consultant Agreements can range in length depending on the complexity of the relationship and the services that are being provided. Some Consultant Agreements last for a short period of time or until a specific task or project is completed, but they can be used for full-time or part-time purposes.

Consulting Agreements are used when the company wants services but does not want to have the obligations of hiring an employee (eg. payroll deductions, benefits etc.). It is important to understand the differences between an employee and consultant.

The Canada Revenue Agency looks at several factors when determining the true nature of the relationship and whether the company or individual is properly classified as an employee or a consultant/independent contractor. If the consulting relationship has the features of an employment relationship the CRA can classify the service provider as an ‘employee’ even if they were hired under a Consulting Agreement.


What are the core elements of this document?

The core elements include: parties, duties and responsibilities, reporting obligations (who the consultant reports to), compensation, reimbursements and allowances, work hours/schedule, independent contractor status, settlement of disagreements, termination clause, and intellectual property and confidentiality clauses.

Some examples of additional clauses include terms of departure, non-solicitation, non-competition, limitation of liability, stock option plan, and indemnification.


Related Documents

Nondisclosure/Confidentiality Agreement – an agreement that protects confidential information

Intellectual Property Transfer, Assignment and Release – an agreement that transfers the intellectual property from one person to another eg. from a consultant/contractor or employee to the person who ‘hired’ the consultant/contractor or employee

Employment Agreement – an agreement that sets out the terms of an employment relationship

Workplace Harassment Policy – this policy deals with harassment in the workplace

Romantic Relations in the Workplace Policy – this policy deals with romantic relations in the workplace

Drug and Alcohol Policy – this policy deals with drug and alcohol use in the workplace and the procedures to follow if unauthorized use is suspected


–  –  –

This article is provided for informational purposes only and does not create a lawyer-client relationship with the reader. It is not legal advice and should not be regarded as such. Any reliance on the information is solely at the reader’s own risk. Clausehound.com is a legal tool geared towards entrepreneurs, early-stage businesses and small businesses alike to help draft legal documents to make businesses more productive. Clausehound offers a $10 per month DIY Legal Library which hosts tens of thousands of legal clauses, contracts, articles, lawyer commentaries and instructional videos. Find Clausehound.com where you see this logo.