Agreements for consultancy services (Hong Kong

This guide is based on the law of Hong Kong. It was last updated March 2005. A UK version is also available.

Overview

IT consultancy services continue to be in great demand.
A consultancy services agreement may be appropriate:

• for work which arises on an occasional basis, or
• where particular technical skills are not available within the organisation, or
• for short term assignments, perhaps where there is some urgent trouble shooting.

If there is to be a development project with defined time-scales for staged delivery, a consultancy agreement may not be the best way to regulate the rights and obligations of the parties. The client would probably find a system development agreement a more useful choice.

Structure

The structure of a consultancy agreement will depend on the circumstances, for example:

• Is the contract to be made between the client and an individual consultant, or between the client and the consultant's employer?
• Is the contract to cover the services of a number of staff, or the services of one person?
• Are the services to be provided for a defined length of time, or called on from time to time?

If the services have to be called on from time to time, it will be useful to have a master agreement for the provision of services, with separate project statements drawn up as and when necessary. The project statements are incorporated into the master agreement, to specify the services involved in any specific assignment.

Services

The user of the services will wish them to be provided promptly and efficiently, by well-qualified staff, at a fair charge. The supplier of the services will want to be clear about the scope of the services covered for the agreed fees, so that any work carried out which was not included in the original project statement will incur additional charges.

Where the supplier is acting in the course of a business, the Supply of Services (Implied Terms) Ordinance implies three obligations into the contract. Under the Ordinance, the services must be carried out:

• with reasonable skill and care;
• within a reasonable time (if no time for performance has been agreed); and
• for a reasonable price (if no price has been fixed in the contract).

These general duties can prove difficult to apply to a practical situation and it is generally more helpful to both parties to identify and describe their respective obligations in clear, objective and measurable terms. This description will include the nature of the services, hours to be devoted to the services, the timetable for delivery, the deliverables, any acceptance criteria applicable to the deliverables and the price.

Where different consultants are providing services at the same time in the same area of work for the client, it is important that the different inputs are successfully matched, so that work is not duplicated, there are no gaps in the results and there are no conflicts over interpretation.

Client's obligations

The precise role and the extent of the client's responsibilities under the contract should also be considered and incorporated into the contract. The client must pay for the services. The client may be expected to provide information to the consultant about its organisation or related to the services. If the consultant is working at the client's office, various facilities should be available for the consultant's use. These can be spelt out in the contract.

Ownership of software and other work

Who is to own the consultant's work? In the absence of a contractual provision to the contrary, the consultant or the consultant's employer will own it. Ownership of the software or other work in itself should not automatically be required by the client. It may be important if a number of consultants are working together on the same project, and as a consequence it becomes almost impossible to distinguish the different inputs, or if the client is going to supply the results of the consultant's work commercially to other companies or organisations. However, a consultant who is a specialist will not want to limit the use of skills for further assignments by signing away rights to unique expertise. Similarly, programmers who make use of standard routines and coding in their approach to problem solving should not assign copyright.

The consultant should, however, grant permission by means of a licence to the client, to use and amend the software, documentation or other materials developed. The consultant must also be properly licensed to access and use the client's or any third party's software.

Contact:peter.bullock@out-law.com / +852 2521 5621.