28 June 2022

Signing International Consulting Contracts: pay attention to the details!

As countries around the world become more and more connected, the work and content that international lawyers need to handle continues to grow in richness. International lawyers often put more time and effort into drafting consulting contracts than other contracts, as they often involve ongoing and more complex relationships without easily defined deliverables. In drafting these points a few key items should not be left unattended, apart from a solid description of the work to be performed and the price. But that goes without saying.

First of all, we need to pay attention to the need to sign a written contract with the client. Even if the communication between the two parties is smooth, the discussion on key points must be written down in a written contract for easy access and can be used as “a time-table”. Communication via email or other social networking software is not conducive evidence if needed at a later stage.

Secondly, clauses that limit the amount of damages are very important. While the principle of damage limitation is written into most international consulting contracts, there are still unreasonable clauses. We often see provisions stating that the maximum recoverable damages cannot be higher than the fees paid by our client firms under the contract. Since the potential for damage from underperforming services can easily exceed the amount paid for such services, it is often unacceptable to limit recoverable damages to the fees paid. At the other hand, sometimes consultants offer little recovery so the need demand the consultant takes out insurance to cover the damages is often advisable. While considering limitation of liability clauses, indemnification is also important. Many contracts contain a 'one-way' indemnity clause - providing for the client to indemnify the advisor for damages that the client company may have suffered as a result of the advisor's negligence - but these consulting agreements often ignore the damages that the client firm may have suffered as a result of the advisor's negligence. Therefore, a two-way 'indemnity' clause is necessary.

In addition, international consulting contracts and the work performed on the basis of these contracts are subject to intellectual property rights as it often involved  “personal work”. If you pay for this personal work or any documents, designs, etc., then you should have the right to use them and own them. So your contract should provide for that. From the consultants point of view, it is advisable to include a 'disclaimer' - stating that the risk of reusing the documents without their consent is at the client's own risk.

Finally, pay attention to the choice of law and the venue for litigation. More than once we encounter that due to a wrong choice of law and venue, the international consulting contract can not be enforced and therefor is actually useless.

In general, you should include all of the above provisions in any consulting agreement, whether you are a company that hires foreign consultants or a company that provides consulting services to overseas companies. Consider limitation of liability clauses, individual intellectual property rights, use a written contract and think what happens if things do not turn out as expected.

Do you need advice on this topic? Please contact Joost Vrancken Peeters on +31 620210657 or jvp@lgga.nl or Xinyi Yan at on x.yan@lgga.nl.

Author
J. (Joost) Vrancken Peeters

Lawyer & Partner

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