Magazine article Occupational Hazards

Avoiding the Pitfalls of Consulting Contracts

Magazine article Occupational Hazards

Avoiding the Pitfalls of Consulting Contracts

Article excerpt

Veteran safely consultants and a legal expert share their advice and experiences about entering into contracts with clients.

Imagine this hypothetical situation: A safety consultant provides on-site safety management for a construction company at a specific construction site. When stock is improperly hoisted by a crane, it falls on a worker, amputating his leg. Is the consultant liable for what happened because he was advising the company on safety?

Safety, health and industrial hygiene consultants advise companies on how to keep employees safe and avoid risk. Yet, giving advice can be a risk in itself for a consultant.

Contracts are supposed to help mitigate any confusion between a consultant and his client by clearly defining the consultant's scope of work, but a contract also can be a burden. According to experts, consultants can be easily confused by sophisticated language found in many clients' contracts. As a result, a consultant could create more liability for himself by signing a contract he doesn't understand than he would have working without a contract. Along with their professional expertise, consultants also need to know how to develop and negotiate contracts and avoid potential legal pitfalls.

The Contract

Knowing the elements of a standard agreement is the first step to a successful contract negotiation. A contract between a client and a consultant should include the following elements:

* Limits of liability

* Indemnity provisions

* Scope of work

* Time frame

* Payment schedule

The limits of liability explain the responsibilities of the consultant. Lindene Patton, CIH, an attorney for Zurich American Specialties, New York, said consultants need to pay attention to the limits of liability portion of the contract because this is where many clients attempt to make the consultant responsible for the client's acts, errors and omissions, as well as their own, "Big and medium-size companies who present contracts to consultants work pretty hard to make sure all of the liability has been shifted to the consultant," said Patton.

Gayla McCluskey, CIH, a consultant with Global Environmental Health Services in Radnor, Pa., said she tries to stay away from jobs where there is too much implied liability. Recalling one job offer, McCluskey said she would have needed to purchase additional insurance to protect herself from the liability. "The amount of money I would have made wasn't worth the potential liability I could have had in the future, so I turned the job down," said McCluskey.

Consultants can pay the price if they are not cautious about the amount of liability they assume. Melanie Martz with Complete Equity Markets Inc., Wheeling Ill., a firm that provides professional liability insurance to consultants, explained an example of a liability claim made against a consultant. "The consultant insured by our firm provided fire loss prevention services to a chemical plant. Following a chemical explosion that killed nine people and injured 31, the insured was named in the litigation. The claim was settled in excess of $23,000," said Martz.

Patton suggested that consultants look carefully at indemnity provisions to make sure they are well thought out. In most cases, the consultant agrees to indemnify the client for losses arising out of the consultant's acts, errors and omissions.

A precise scope of work allows a consultant to clearly define what he will be doing and what questions he will be answering for the client. Patton said a poor scope of work leads to confusion between the client and the consultant. Confusion and miscommunication are prime sources for any type of claim. "More claims come out of a misunderstanding regarding performance obligations than actual bodily injury or property damage," said Patton.

Nondisclosure clauses prevent the consultant from discussing his client's potential patented information and ideas. …

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