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This is a simple company friendly consultancy agreement for engaging independent contractors or consultants (e.g. individuals or sole operator companies) to work within a business.
For startup businesses or businesses seeking investment and/or a liquidity event, it is important to have this type of agreement in place for all independent contractors to evidence that company IP is properly protected, i.e. there can be no argument of whether the company or the independent contractor owns the IP.
This template includes a restraint on the independent contractor to ensure that the independent contractor does not jeopardise the company’s business (by competing or similar) during the term and for a set period after. To be enforceable, a restraint must be reasonable. This, in turn, will depend on the facts relating to the agreement. However, the longer the restraint and the broader the restrained area, the more likely that arguments could be raised about the enforceability of the restraint.
Where the independent contractor is a sole operator company (a one man band), you should set out in the Key Details section of the agreement the name of the individual actually doing the work and seek an undertaking from that individual to agree to key restrictions in the agreement (namely, restraint, IP, and confidentiality). Otherwise, you run the risk of binding a shelf company but not the individual who can damage your business the most. A form of undertaking is attached to the agreement.
You should consider whether the company’s relationship with the proposed other party to the agreement is an independent one or whether the person should be an employee of the business. In some circumstances, an individual may be deemed to be an employee regardless of their stated contractual status. Being deemed to be an employee depends on the individual circumstances, but factors include duration of the relationship (longer term may suggest an employment relationship), who provides equipment, who controls how and what work is done, and the extent to which the contractor is autonomous.
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