Though a Consultancy Agreement and a Supply of Services Agreement serve the same purpose - the provision of a service to another business entity - the terms of each agreement are slightly different.
We have summarised the main differences between these two documents below:
Term of Engagement
Under a Consultancy Agreement, termination occurs if either party gives notice
However, under a Supply of Services Agreement, termination occurs if the services are completed or after a set period of time.
Duties and Obligations of the Consultant/Supplier
Under a Supply of Services Agreement, the supplier must provide the services and deliver the deliverables stated in the agreement and its schedules.
During the performance of the services, the supplier must (i) exercise reasonable care and skill; (ii) follow commercial practices and standards in the applicable industry; and (iii) comply with relevant laws and regulations.
Under a Consultancy Agreement, the consultant has the same obligations as the supplier. In addition, the consultant must also:
devote a certain amount of time per day/week/month to be defined in the Consultancy Agreement;
promote the financial and commercial interest of the client (such as business opportunities);
report to the client and inform the client of anything related to the services as may be required in the Consultancy Agreement; and
comply with the reasonable standards of safety and health and safety procedures applicable at the premises, and any other policies as required by the consultant.
The consultant also has the option under the Consultancy Agreement to appoint a substitute.
Duties and Obligations of the Client/Customer
Under a Consultancy Agreement, the client's sole obligation is to pay the fee in accordance with the terms agreed.
However, under a Supply of Services Agreement, in addition to the above, the customer must:
provide any equipment, material, and information needed by the supplier in the performance of his duties;
obtain and maintain required licenses and consents; and
provide access to the premises when needed.
Fees and Payment
Under both a Consultancy Agreement and a Supply of Services Agreement, the client/customer must pay the fee after receiving an invoice from the consultant/supplier. In both documents, the Document Builder offers flexibility and such fees can be calculated per hour/day/week/month or in total.
The main differences relate to:
Deduction: only under the Consultancy Agreement can the client/customer deduct from the consultant's fee sums that the consultant owes;
Deposit: only under the Supply of Services Agreement can the supplier request payment of a deposit; and
Expenses: only under the Consultancy Agreement can the consultant claim reasonable expenses.
Under a Supply of Services Agreement, the supplier is free to be engaged or concerned or have financial interest in any capacity in any other business entity.
Under a Consultancy Agreement, the consultant can only do the above as long as such an entity is not a competitor of the client, unless the client has agreed to it in writing.
Change of Service
The Supply of Services Agreement provides a detailed procedure to change or request additional services.