Consult Australia’s New “Concise” Consultancy Agreement
If you are a consultant or a client on any project, it is important that your contract allocates risk according to the bargain reached, and presents no unforeseen liability or contains any surprises. Particularly in the wake of the Lacrosse Tower judgement and rising insurance premiums, consultants must be aware of their obligations under the contract, clearly define their scope of works and, if at all possible, limit their total liability to avoid potentially serious consequences. It is also now, more than ever, important to be working closely with your insurance brokers to ensure insurance coverage is not prejudiced in any way. Whilst for clients, it may be advantageous to tighten their exposure to risk and uncertainty, such as in respect of time and cost.
Consult Australia has recently released a new consultancy agreement, which they state is “designed for use by consultants of various sizes and disciplines across a range of projects.” The agreement replaces all former versions and includes a helpful ‘advisory note’ which amongst other things encourages users to take care when drafting fee proposals and related documents to ensure there is certainty and clarity for all parties to the agreement. What both clients and consultants should also do though, is review the terms of the agreement to identify and rectify, for their specific project, any gaps that could end up costing either party more than the price of the works.
Charged with representing its member’s interests, Consult Australia could be forgiven for having released what is undoubtedly a consultant-friendly document, albeit which is quite practical in some respects. The document provides consultants with a benchmark position on various aspects of an engagement, which in the least arms consultants with a good idea of where negotiations could start with a client.
In this article, we take a brief look at some of the benefits and potential issues with this new consultancy agreement:
Clauses 1 to 4:
Defining scope is vitally important to both parties. For the client it is obviously important that they correctly stipulate what they are agreeing to buy. For consultants, not only do they need to be clear on what they are pricing and will have to deliver on time, but they also need to ensure they are not agreeing to undertake work for which they are not licensed or insured. A poorly prepared scope document will inevitably give rise to disputes.
The parties will also need to ensure that nothing in the scope conflicts with the body of the agreement, since without amendment the agreement does not contain an order of precedence in uncertainty.
Clauses 6 and 7:
Clauses 6 and 7 deem what will be variations and provide a regime for their valuation. The consultant will have up to 7 days to notify the client of the effects a variation will have on time and cost, even though the variation will be deemed to have been initiated anyway. In respect of client-originated variations, clients might therefore choose to seek such information from the consultant prior to confirming such variations.
Risk associated with changes in law will lie with the client, which many would argue is where this risk best sits. Any “reasonably necessary” changes in scope will also be deemed as variations.
It is only within clause 7 that extensions of time are catered for; there is no other extension of time regime within the document. This is workable, and essentially acts as a force majeure provision given the breadth of what constitutes a variation in clause 6. However, if the parties negotiate amendments to the variations regime, then they will need to be mindful of the impact that might have on how time is dealt with.
Clauses 8, 9 and 20:
Payment timeframes will not comply with jurisdictional security of payment regimes. If the contractual timeframes are followed in lieu of those stipulated in legislation, serious consequences will result. Amendments should be made depending upon the relevant jurisdiction, so as to ensure compliance with local laws.
Further amendments should also address the clause 20 holiday periods as not all payments legislation recognise such office shutdowns.
Additional amendments might also address the rate of interest applicable to late payments, for example to comply with, where relevant, the Queensland Building and Construction Commission Act 1991.
The cap on liability currently applies in respect of the consultant’s liability “to the Client” only. If the text “to the Client” were removed it might present a more favourable position for the consultant. Namely, if the consultant through the provision of the services found itself owing a liability to a third party (e.g. for a personal injury claim), then that liability could be said to reduce what liability it could owe to the client.
Noting that an overriding cap can be included in the scope document, the default cap on the consultant’s liability (of $300,000) has no correlation with the scope, fee or risk involved in the Services. It is understandable that a default amount has been included to protect consultants in the event they fail to appropriately negotiate their contract, but in many cases the parties should negotiate a cap that best suits the circumstances.
Consultants particularly would need to consider the exclusion of consequential loss provision, since generic terms such as “indirect”, “consequential” or “special” losses will not necessarily include all types of consequential losses which the consultant might later seek to avoid. If for a particular engagement the consultant would like to exclude certain losses then this clause should be broadened to include specific mention of those losses.
Intellectual property rights in the consultant’s deliverables are stated to remain with the consultant. Whilst this represents the position at Common Law, many clients will undoubtedly require that such rights vest in the client, so as to give the client flexibility for potential future development or maintenance of its asset.
Clauses 14(b) and 16(c):
These clauses allow either party to terminate the engagement for their convenience. Clients particularly, would need to consider the consequences of a consultant terminating the agreement, such as leaving the client to then have to retender the completion of the remaining work.
The above represents a non-exhaustive list of benefits and issues with the new consultancy agreement. Both clients and consultants should be prepared to invest in reviewing their options and the ramifications of certain provisions of the agreement. The best form of agreement will always be one which has been tailored for the relevant project.
If you require any advice as to contract reviews or clause drafting, our specialist Construction, Infrastructure and Projects team in Brisbane has the expertise and experience to help with all types of contracts and agreements. Please feel free to contact us by visiting Holding Redlich at www.holdingredlich.com or call 07 3135 0500.