As a business owner, you might need to enter into contracts with other companies, individuals, or entities for several reasons. The structure of the contract solely depends on the scope and nature of work and obligations of both parties. An example of such a contract is an advisory agreement, and in this brief, we will tell you everything there is to an advisory agreement.
An advisory agreement is signed between advisors and companies availing of their services. The advisor offers their services as a third party.
The agreement covers all the vital details of the scope of work and the the obligations of both parties. It contains the services the advisor will perform, the timeline for service,vice and the compensation plan.
Additionally, it can include provisions regarding confidentiality of information, assignment of supporting teams, and any special considerations.
So you might be wondering, do I need an advisory agreement? It depends. When working with third parties, it is always recommended that you have a written contract. An advisory agreement can equally prove to be extremely useful to you where you need the courts to enforce the performance of the third party. This is because a written formal document such as an advisory agreement makes it easier to prove non-performance and seek legal action. With a verbal contract, it is usually more complicated.
Additionally, an advisory agreement helps to keep all the parties and stakeholders on the same page about what needs to be done.
An advisory agreement usually includes the following:
- This contains the work the company needs the advisor to carry out. That is the service the advisor/third party would be offering. This covers a detailed description of the responsibilities of the advisor. It may also include the company’s members and their roles.
- Compensation: An advisory agreement usually contains a compensation plan. This includes the payment plan, the amount to be paid, and when the payment will be made. made. Accepted methods of payment should also be included. It is important to note that compensation may alin the be in form of equity in the company.
- Term of Service & Termination: The agreement should also provide the timeframe for the advisor to carry out its obligations and consequences for non-performance. A clear start and end date for the agreement should be included as well as a time of agreement renewal, revision provisions and conditions of terminations of the agreement.
- Contractual Relationship: The agreement usually contains clauses which provide the kind of relationship that exists between the company and the advisor/third party. Most advisors work as independent contractors with a non-exclusive relationship with the parties.
- Expenses: This clause makes provision for expenses the company might reimburse and the reimbursement process and exceptions.
- Intellectual Property: It is also essential to provide and identify who owns intellectual property rights. Since both parties would be working together, the company usually holds ownership of any data, tools or assets. Additionally, any licensing agreements should be discussed and detailed in the advisory agreement to protect intellectual property rights.
- Limitations: These agreements usually contain limitation clauses. These clauses restrict the advisor’s ability to work with specific companies or undertake some projects for a specified period. This is to prevent conflict of interest. Companies may also provide non-solicitation clauses that prevent advisors from poaching company talent, clients and contacts for some time.
- Dispute Resolution: In the event of any dispute, claim or controversy arising out of, relating to, or in connection with this Agreement, it is important to provide a clause which states how such dispute would be resolved. It could provide the procedure method of the dispute resolution, timeline as well as jurisdiction.
In conclusion, drafting advisory agreements can be tricky, so it is always advisable to contact an attorney. If you are in the process of drafting agreements and contracts, contact a competent lawyer who can get the job done and protect your corporate and legal interests.