Corporate agreements

Consultancy / Independent Contractor Agreement

A Consultancy or Independent Contractor Agreement is a commercial contract that defines the terms under which a consultant provides services to a client company. It establishes an independent, principal-to-principal relationship, distinguishing the engagement from an employment contract.

This document is a private agreement governed by the Indian Contract Act, 1872. It does not require registration and is executed on nominal stamp duty as applicable in the relevant State.

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Governing law
Indian Contract Act, 1872
Sections
s. 10s. 27s. 73

When this is the right filing

  • When a company engages a professional or firm to deliver specific, project-based services without creating an employer-employee relationship.
  • When the service provider will control their own work methods, bear their own tax and insurance liabilities, and is not subject to the company's day-to-day supervision.
  • When the engagement is for a fixed term or specific deliverables, and the parties wish to define ownership of intellectual property and confidentiality obligations.
  • Do not use this agreement if the company will control the individual's working hours, provide tools, and supervise daily tasks; that relationship is one of employment and requires an appointment letter and compliance with labour laws.

What the court looks for

  • Clear recitals and operative clauses that establish the consultant's independence, including the absence of direct control, integration into the company's business, and exclusivity.
  • A defined scope of work and fee structure that reflects a principal-to-principal commercial arrangement rather than a salary.
  • Clauses that place the responsibility for income tax, GST, provident fund, and other statutory dues squarely on the consultant.
  • A reasonable restraint of trade clause, if any, that complies with Section 27 of the Indian Contract Act, 1872.

The structure the court expects

The components of the filed format, in the order they appear. LexPilot fills every one of them from your facts and papers.

  1. 1Recitals
How it opens
WHEREAS the Company desires to engage the Consultant to provide certain professional/advisory services on an independent basis, and the Consultant has represented that it possesses the requisite skill, expertise and resources and is willing to provide such services on the terms set out below.

Bracketed items are filled from your case.

Frequently asked questions

What is the key legal difference between a consultancy agreement and an employment contract?

The key distinction is control. A consultant works independently, controls their own work methods, and bears their own tax and compliance liabilities. An employee works under the direct supervision and control of the employer, who is responsible for deducting tax at source and making provident fund and ESI contributions. Courts examine the substance of the relationship over the label given by the parties.

Does a consultancy agreement need to be registered or notarized?

No. A consultancy agreement is a simple contract under the Indian Contract Act, 1872. It does not require registration or notarization. It is executed on non-judicial stamp paper of the value prescribed by the relevant State's stamp act.

Can a consultancy agreement include a non-compete clause after the contract ends?

A non-compete clause that operates after the term of the contract is void under Section 27 of the Indian Contract Act, 1872, as it is considered a restraint of trade. Reasonable non-compete restrictions during the term of the consultancy are generally enforceable. Confidentiality and non-solicitation clauses are the standard post-termination protections.

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