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27/10/2021 – Negotiating consultancy agreements: what’s your experience?

In our recent webinar series ‘Getting Confident with Contracts – Part 1: A Practical Perspective’, polling indicated the following about client drafted contracts:

  • at least 50% of consultants are told by clients that you are the only ones that won’t sign their contracts;
  • over 50% of consultants have been told that client agreements cannot be amended;
  • approximately 45% of consultants were initially told by clients that they would not agree to amending their contract but later changed their mind; and
  • over a quarter of consultants have had fees withheld in-the-midst-of heated contract negotiations as leverage to pressure you to sign their contracts.

Typically, bespoke client contracts contain very onerous terms, often including, ‘ensure’, ‘warrant’ and ‘fitness for purpose’ clauses, unfavourable limitation of liability clauses limiting the client’s liability and, clauses allowing clients to own the copyright in your work.  As you have identified in the poll, negotiating out of these burdensome requirements can be difficult often leaving you feeling like you have no option but to sign.

It can be very helpful to have to hand standard pro forma contracts to assist you in your negotiations. Standard pro forma contracts have been developed by government and industry representatives with the aim of assisting fairer and balanced negotiations between parties.

Australian Standards 4122-2010 and 4904-2009 are relatively balanced pro forma contracts commonly used by consultants.  The AS 4904-2009 is somewhat more aggressive but is well suited to design and construct projects as it contains within it a deed of novation.

Other pro forma contracts can be sourced from Consult Australia, the ACA and the Institute of Architects, amongst others.  These contracts are very consultant friendly and the endorsements by industry bodies may encourage clients to adopt them.

It is important to be aware however, that even the Australian Standard pro forma contracts contain some provisions which do present some risk.  In Part 2 of our webinar series – Industry Proforma Contracts, we will provide some insight into the insurance implications and overall risk profiles arising out of the Australian Standard and Industry pro forma contracts mentioned above.

Despite the existence of standard and industry pro forma contracts, here at informed we are still reviewing predominantly bespoke client drafted contracts.  This has us wondering, is all the work that has been done by government and industry bodies thus far really leaving consultants in a better position as far as their contracts are concerned…?  We’d like to hear from you in our upcoming webinar.

Kathryn Budd
Risk Manager

This article is only general advice in respect of risk management. It is not tailored to your individual needs or those of your business, nor is it intended to be relied upon as legal or insurance advice. For such assistance you should approach your legal and/or insurance advisors.

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