Consulting agreement (independent contractor)

What it is and when it is used

A consulting agreement (also called an independent contractor agreement or freelancer contract) is the contract a business uses to engage an outside professional to provide consulting, advisory or other professional services. The parties state from the outset that the consultant works as an independent contractor and not as an employee of the client.

It is used for project work defined in a statement of work, for monthly retainers, and for engagements paid by milestone. Besides scope and payment, the agreement deals with two risks that are specific to contractors: who owns the work product, and whether the relationship could be reclassified as employment.

Who signs it and in which role

Two parties sign:

• The Client, a company that engages the consultant and pays for the services.
• The Consultant, who may be an individual or a company, and who performs the services.

The parties fill in the facts of the deal: a description of the services, monthly hours for a retainer, the hourly rate, a maximum number of hours, the deposit percentage, the initial term in months (12 by default), the start date, the geographic area for any non-compete, the kill fee percentage and the liability multiple (2 by default).

Key clauses

Scope of work

Defines what the consultant delivers. The options are a detailed statement of work attached as an exhibit (deliverables, timeline, acceptance criteria), a retainer for a set number of hours each month, or milestone-based deliverables with payment on acceptance of each milestone. A clear scope matters beyond project management: both the California ABC test and the IR35 rules ask whether the worker controls how and when the work is done, and a vague, open-ended scope increases the risk of reclassification.

Payment terms and rate structure

Payment terms set when invoices are paid: within 30 days, within 15 days, or a deposit up front with the balance on completion. The rate structure sets how the fee is measured: an hourly rate with time records, a fixed project fee, or a daily rate common for on-site advisory work. The skill notes that a fixed fee is the strongest indicator of contractor status, because the consultant bears the risk of overruns, while uncapped hourly pay can resemble employment.

Term and renewal

The engagement can run for a fixed term with no automatic renewal, renew automatically unless either party gives notice, or continue until terminated. Long, automatically renewing or open-ended engagements can point towards employment; a defined term with a clear project supports contractor status.

IP ownership

The client can own all work product (with a licence to any pre-existing material of the consultant built into it), receive an exclusive perpetual licence while the consultant keeps ownership, or receive a non-exclusive licence while the consultant remains free to reuse and resell the work. Without a written assignment, the IP stays with the consultant.

Confidentiality

Mutual confidentiality with standard exceptions and a 3-year survival period, a one-way obligation on the consultant only, or an enhanced mutual version with security measures, 48-hour breach notification and 5-year survival (indefinite for trade secrets).

Non-compete and non-solicitation

The consultant may agree not to solicit the client's employees and customers for 12 months while staying free to work for competitors, may accept both a non-compete and a non-solicitation for 6 months after the engagement, or may have no post-engagement restriction beyond confidentiality.

Termination rights

Either party may end the agreement on 30 days' notice; or the client may terminate for convenience on 14 days' notice and pay a kill fee, while the consultant must give 30 days; or, during a fixed term, termination is allowed only for cause, and a client that ends it without cause pays the remaining fees.

Limitation of liability

Liability capped at the fees paid in the 12 months before the claim, a cap set at a multiple of those fees, or no cap. The capped options exclude indirect and consequential damages and carve out breaches of confidentiality, IP infringement, gross negligence and wilful misconduct.

Independent contractor status

A standard declaration of contractor status; an enhanced clause that addresses control, substitution, business integration and economic independence, with mutual indemnities if the relationship is held to be employment; or a clause built around the consultant's right to send a qualified substitute, which the skill describes as a key indicator under IR35.

The standard terms also cover performance standards, professional indemnity insurance, expenses (borne by the consultant unless agreed) and subcontracting with notice to the client.

What the two sides usually negotiate

The client generally prefers full ownership of the work product, a one-way confidentiality obligation, a non-compete, short notice to terminate for convenience, and fixed fees. The consultant generally prefers keeping ownership of reusable work, mutual confidentiality, freedom to work for competitors, termination for cause only during a fixed term, and a liability cap.

When the two sides disagree, Dealroom proposes the balanced positions in the skill:

• Scope: a retainer-based engagement.
• Payment: a deposit up front plus a completion payment.
• Rate: an hourly or daily rate.
• Term: an auto-renewing term with notice of non-renewal.
• IP: an exclusive licence to the client, with ownership staying with the consultant.
• Confidentiality: mutual, either standard or enhanced.
• Termination: either party on 30 days' notice, with payment for work done.
• Liability: a cap at the fees paid, or at a multiple of them.
• Status: the standard contractor declaration.

On restrictive covenants there is no fully neutral option; non-solicitation only is the position closest to the middle.

Jurisdictions and languages Dealroom supports for it

Dealroom drafts this agreement under the law of California and of England and Wales, in English or Spanish.

• California: the agreement records that contractor status must satisfy the ABC test in Labor Code section 2775 (AB5), and disputes go to the courts of a California county. The non-compete option is not available.
• England and Wales: the agreement refers to the IR35 rules and the client's Status Determination Statement, preserves liability for death or personal injury caused by negligence and for fraud under the Unfair Contract Terms Act 1977, and applies statutory late payment interest where relevant.

For a services engagement governed by Spanish law, use the Spanish services agreement.

Common mistakes

• Relying on the label alone. Calling someone a contractor is not decisive. If the client in practice controls how and when the work is done, the relationship may be reclassified as employment.
• Leaving IP unassigned. Work by a contractor is generally not a "work made for hire" in the United States, and in the United Kingdom IP vests in the creator. Without a written clause the client may not own what it paid for.
• Adding a non-compete in California. It is void for independent contractors. Use non-solicitation and confidentiality instead.
• Choosing open-ended terms without thought. An ongoing or automatically renewing engagement, an hourly rate with no cap and a broad retainer can each weaken contractor status.
• Accepting a substitution right on paper only. The skill notes that the consultant must actually be able to exercise the right for it to be credible.
• Uncapped liability for a small consultancy. It creates unlimited exposure and requires matching professional indemnity insurance.

# 1. Read the clauses, options and the facts it needs
curl https://dealroom.todo.law/api/v1/agent/templates/CONSULTING \
  -H "Authorization: Bearer drk_YOUR_KEY"

# 2. Create the contract (clauses you leave out take the default option)
curl -X POST https://dealroom.todo.law/api/v1/agent/deals \
  -H "Authorization: Bearer drk_YOUR_KEY" \
  -H "Content-Type: application/json" \
  -H "Idempotency-Key: $(uuidgen)" \
  -d '{
    "schema": "dealroom.solo-intake/1",
    "contractType": "CONSULTING",
    "governingLaw": "ENGLAND_WALES",
    "language": "en",
    "dealName": "Example CONSULTING",
    "selectionPolicy": "defaults"
  }'