No matter the circumstance or industry, every fair contract and agreement allows some form of voluntary termination. If you’re on the receiving end of one that doesn’t, it’s probably not in your favor, and you probably shouldn’t sign it. But, what about when it comes to performance-based consulting? Can a performance-based consulting agreement be terminated?
Before going further, it’s important to understand that almost every contract can be terminated for a number of reasons:
- Impossibility of Performance
- Breach of Contract
- Termination by Prior Agreement
- Rescission of the Contract
- Completion of the Contract
But, this article isn’t pertaining to any of those reasons. The type of termination that this article is in regard to is voluntary termination. In other words, just because.
So, let’s find out.
Can a Performance-Based Consulting Agreement Be Terminated?
It’s impractical to believe that every performance-based consulting agreement out there can be terminated. However, as mentioned above, every fair contract and agreement, regardless of its intended use, should include some type of voluntary termination clause. Just like a confidentiality clause, it protects both parties.
It’s no different for a performance-based consulting agreement.
The majority of performance-based consulting agreements allow the business owner to voluntarily terminate the agreement. And, the business owner might do so for a variety of reasons – a loss in their family, a personal matter, not enough time to devote to the consulting relationship. Heck, they might just not like or get along with the performance-based consultant!
Whatever the case, and assuming that there’s a termination clause in place, the business owner is free to terminate the agreement as they wish.
How Can a Performance-Based Consulting Agreement Be Terminated?
To terminate a performance-based consulting agreement, a business owner usually has to do a couple of things.
First, they must inform the business consultant of their desire to terminate the contract, often via written notice. If they’d like, they may also disclose their reason for terminating, although it’s not required.
Secondly, they must allow for a certain stretch of time to pass before the consulting period is completely stopped. Typically lasting between two weeks and one month, this time allows the business consultant to proactively plan for a change to their future schedule, as well as to finalize any hanging tasks with the business or business owner.
Afterwards, the consulting period comes to an end.
What Happens After a Performance-Based Consulting Agreement Is Terminated?
Because performance-based consultants often don’t get paid until the completion of their services, a business owner’s voluntary termination is treated a little differently. It’s not as simple as cutting ties because the performance-based consultant has yet to be compensated for any of the potential results that may arise from their work.
As a result, it is most common for the performance-based consultant’s compensation terms to be adjusted proportionally to the amount of work that has been done for the business.
For example, presume that a performance-based marketing consultant is set to work with a business for four months. As compensation, they’re going to receive 20% of the additional net revenue that they help their client generate, via their marketing strategies, for the following 12 months. If the business owner terminates the agreement after the second month, essentially cutting the consulting period in half, then the consultant will only receive 20% of the additional net revenue for six months, not twelve.
For performance-based business consulting, contact The Business Turnaround Group.