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Published Wednesday, June 15, 2016
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Client Intake: Written Proposal vs. Written Contract

As a consultant, you present both written and oral proposals to prospective clients for services. These proposals vary in format from short discussions to lengthy written documents explaining proposed services and related benefits to clients. In presenting a proposal, prospective clients should be informed that, while this constitutes an offer to perform services, a proposal does not represent a service agreement. Written proposals should not be used as a substitute for an engagement contract. All clients should be advised that a written contract will be drafted for their signature before any services commence.  

Written contracts promote constructive business relationships by clarifying mutual obligations and expectations. They help mitigate the risk of the “expectation gaps” between consultants and clients regarding the scope, timing and extent of services to be provided, as well as payment obligations and resolution of billing disputes that may arise. A centralized contract development process strengthens your negotiating capabilities and reduces the potential for misunderstandings about contractual obligations. This process involves three major phases: negotiation, drafting and review/distribution.  

Phases of Creating the Contract

1. Negotiation 

Carefully analyze opportunities and risks before and during negotiations, considering past partnership experiences and available information about prospective partners. Identify any provisions that require in-depth research and legal review. If the client is in an industry subject to state or federal oversight and regulation, certain contractual provisions may be required. If your firm will have access to confidential client or patient data, federal and state privacy laws will apply. 

Identify any conflicts of interest. If a potential or actual conflict of interest is identified, but the consultant has concluded that services can be rendered objectively and can act permissibly under applicable ethics rules, a written conflict of interest waiver should be included in the contract. These issues should be discussed with the client prior to drafting the contract. 

2. Drafting

While your firm’s generic contract template may be used as a general guide, customize all contracts to the client to help avoid unintended legal consequences. The following items should be addressed:
 

  • Scope of work
     
  • Goods or services to be provided
     
  • Obligations of contracting parties
     
  • Performance expectations  
     
  • Quality requirements
     
  • Timeframes
     
  • Costs
     
  • Payment terms
     
  • Insurance requirements, if applicable
      
  • Confidentiality of customer information
      
  • Consequences of breach of contract
      
  • Termination provisions
      
  • Indemnification and hold harmless provision, if applicable
      

The following recommendations will further strengthen your contract draft. Clearly articulate expectations. Identify the names and forms of ownership of all parties, including third parties or subsidiaries that will supply services. Include a default and termination provision and address dispute resolution remedies. Refrain from incorporating or referring to other documents in the contract. Contracts should be explicit, defining all material items affecting both parties’ obligations. Define any technical terms in the contract. Finally, delineate timing of the engagement. As clients may attempt to assert professional liability claims several years after the service they allegedly relied upon was rendered, it is imperative to express all aspects of the engagement parameters through the contract drafting process.

3. Review and Distribution  

Once the draft has been finalized, ensure that all aspects have been reviewed by an attorney conversant with contract law. Then determine who is authorized to sign the contract on behalf of your firm. Promptly communicate the status of all your contracts, amendments, addenda and renewals. By formalizing the contract process and routinely informing your staff of new relationships and obligations, you will help your firm adapt quickly to these business arrangements. 

As most contracts have liability implications, thorough coordination with legal counsel, careful drafting and review are required to protect your firm’s interests. Effective client and engagement intake processes that incorporate the use of appropriately drafted contracts, non-representation letters and closing letters can help protect management consultants from potential malpractice claims and mitigate the risks associated with defending such claims.

One or more of the CNA companies provide the products and/or services described. The information is intended to present a general overview for illustrative purposes only. Read CNA’s General Disclaimer.
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One or more of the CNA companies provide the products and/or services described. The information is intended to present a general overview for illustrative purposes only. Read CNA’s General Disclaimer.
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