Definition and Legal Classification of the Consultancy Agreement
The consultancy agreement is a type of contract found in German civil law, in which one party undertakes to provide the other party, for remuneration or free of charge, with advice or information on specific matters. The consultancy agreement may be used in various areas of law, but is particularly significant in economic, tax, technical, or psychological contexts. The consultancy agreement creates mutual obligations, which, depending on how the contract is structured, can significantly affect the rights and duties of the parties.
Distinction from Other Types of Contracts
The consultancy agreement is not specifically regulated by the German Civil Code (BGB), but, rather, is a special form of service contract (sections 611 et seq. BGB). Whereas in a contract for work and services, the success of a particular performance is owed, under a consultancy agreement the advising party undertakes to provide information, recommendations, or assessments to the best of their knowledge and belief, without guaranteeing the success (e.g., the actual implementation of advice given).
Service Contract and Contract of Agency
The consultancy agreement is generally to be qualified as a service contract, since the provided service consists in an activity and not in a specific outcome. In certain situations, however, the consultancy agreement may also be structured as a contract of agency within the meaning of section 675 BGB, for example, if the consultation is provided in matters relating to a third party or is associated with managing third-party affairs.
Formation and Form of the Consultancy Agreement
Conclusion of the Agreement
A consultancy agreement is formed through offer and acceptance. The parties agree that one party will provide consultancy services and the other party will accept these services, possibly in return for payment of an agreed fee.
Requirements of Form
There are in principle no formal requirements for a consultancy agreement, meaning it can be concluded orally, in writing, or by implied conduct. However, in exceptional cases, a specific form may be necessary, for example, if the consultancy agreement is part of a principal transaction that itself requires a set form.
Content and Typical Contractual Components
Scope of Services
The focus of the consultancy agreement is the obligation to provide the agreed consultancy services. The service owed can consist of general information, specific recommendations, or comprehensive expert reports.
Remuneration
In most cases, the consultancy is provided for remuneration, whereby the fee can be freely agreed by the parties. In the absence of an explicit agreement, a customary remuneration is owed under section 612 BGB.
Ancillary Obligations
In addition to the main performance, there are extensive ancillary obligations, in particular duties to inform, duties of care, confidentiality, and documentation obligations. The advising party must be able to safeguard the interests of the contractual partner and inform them fully and correctly about all aspects essential to the advice.
Rights and Duties of the Contracting Parties
Obligations of the Advising Party
The advising party owes the proper provision of the consultancy service in accordance with the contract and with generally accepted rules and standards. It is also obliged to maintain confidentiality regarding all information gained within the framework of the contractual relationship.
Duties of Care
Consultancy services must be performed with the care that can be expected of a person possessing the necessary knowledge and skills. Misinformation or failure to provide clarification can, under certain circumstances, give rise to claims for damages.
Obligations of the Client
The other contracting party is obliged to pay the agreed fee and to provide all information necessary for the proper fulfillment of the advisory service.
Liability in Consultancy Agreements
Scope of Liability
The advising party is liable for culpable breaches of duty under sections 280 et seq. BGB. In cases of gross negligence or intent, there is unlimited liability, while in cases of slight negligence, liability—e.g., for simple negligence—is often contractually limited.
Claims for Damages
Claims for damages may arise if the advice was faulty and as a result, the contractual partner suffers financial loss. However, the breach of duty that gives rise to liability must be examined in each specific case.
Limitation Period
Claims arising from consultancy agreements are subject to the general statutory limitation periods. Typically, the standard limitation period under section 195 BGB of three years applies, commencing at the end of the year in which the claim arose and the creditor became aware of the circumstances giving rise to the claim.
Termination of the Consultancy Agreement
Ordinary and Extraordinary Termination
The consultancy agreement may in principle be terminated at any time by either party with ordinary notice. Any claim for payment may exist on a pro rata basis for services already rendered. In exceptional cases, extraordinary termination is also possible if there is good cause.
Other Grounds for Termination
The consultancy agreement may also end by expiry of time (if limited in duration), achievement of the contractual purpose, or mutual agreement.
Specifics of Consultancy Agreements in Particular Fields
Tax and Economic Consulting
In the field of tax or commercial consulting, special legal provisions may apply, for example, regarding admission requirements and duties of confidentiality. Where third-party transactions are taken on in addition, the agreement may be considered a contract of agency.
Technical and Other Consultancies
In the technical field, the provision of specialist knowledge is often owed, and here the distinction from a contract for work and services must be carefully examined, since in some cases results-based services are also provided.
Summary and Legal Significance
The consultancy agreement is an important type of contract in German contract law, applicable to a wide range of advisory services. Due to the opportunities for individual structuring, the extensive rights and obligations, and the specific liability rules, the consultancy agreement is particularly significant in cases involving complex economic or technical issues. Careful contract drafting, precise agreements regarding the scope of services and liability, and clear stipulations regarding remuneration are advisable for both parties to prevent potential legal disputes.
Frequently Asked Questions
What formal requirements need to be observed in a consultancy agreement?
A consultancy agreement is generally not subject to any particular form requirements, i.e. it may be concluded either orally or in writing. However, it is always advisable to use written form for evidentiary purposes. In certain cases, e.g., in agreements with consumers or in connection with certain consultancy services (such as tax advice or legal advice), special requirements of form may be stipulated, for example by the German Civil Code (BGB), the Tax Consultancy Act, or the Legal Services Act. In addition, written form can also become a contractual requirement if both parties agree. If written form has been expressly agreed upon, it is binding; a violation may affect the validity of the contract. Within the scope of distance selling law for contracts made outside of business premises, additional information duties must be observed. If notarization or certification is required, this usually pertains to exceptional cases of particular significance.
How can a consultancy agreement be terminated?
Termination of a consultancy agreement is primarily governed by the contractual arrangements between the parties. Typically, consultancy agreements contain specific provisions regarding notice periods and conditions, including ordinary and extraordinary termination rights. In the absence of such provisions, the general rules of service contract law under sections 611 et seq. BGB apply—section 621 BGB for continuing obligations and section 626 BGB for immediate termination for good cause. It should be noted that for fixed-term contracts, ordinary termination is not possible without an appropriate agreement; extraordinary termination remains unaffected. For evidentiary reasons, notice of termination should always be given in writing. Any contractually agreed rollback or payment claims must also be considered accordingly.
What liability rules apply to consultancy agreements?
Liability in consultancy agreements is generally governed by the standard provisions of civil law, particularly those applying to service contracts (sections 611 et seq. BGB). The consultant is liable for culpably caused breaches of duty—for example, for incorrect or incomplete advice. Contractually agreed limitations of liability are also relevant in this context; these are generally permissible, but must not contravene statutory prohibitions (e.g., section 276 (3) BGB for intent and gross negligence) or the provisions relating to standard terms and conditions (sections 305 et seq. BGB). For advisory professions such as tax consultants or Rechtsanwalt, specific legal liability provisions apply, for example under the Tax Consultancy Act (StBerG) or the Federal Lawyers’ Act (BRAO), which often also require professional liability insurance. Liability for damages may cover financial loss and, in exceptional cases, additional types of damage, but typically the replacement of contractually foreseeable damages takes precedence.
What duties arise for the contracting parties from a consultancy agreement?
The consultant is obliged to provide the agreed consultancy services professionally, conscientiously, and in the interests of the client. Generally, they do not owe a specific result (not a contract for work), but rather the activity itself (service), unless a result has expressly been agreed. The consultant must inform the client comprehensively, accurately, and understandably, as well as explain risks and alternative courses of action. In addition to a duty of confidentiality, documentation duties may arise from the contract or specialized legal provisions. The client, in turn, is obliged to provide all information necessary for the consultation truthfully and in a timely manner and to pay the agreed fees on time. Both parties are mutually obliged to loyalty and consideration during the performance of the contract.
How is remuneration regulated in a consultancy agreement?
Remuneration is primarily determined by the agreements set out in the consultancy contract. If such arrangements are missing, the usual remuneration is considered agreed upon (section 612 BGB). Billing may be based on fixed amounts, hourly or daily rates, monthly fees, or other predetermined criteria. Additional expenses, travel costs, or special reimbursements can also be agreed upon. Certain professional groups are subject to statutory fee schedules (e.g., Tax Consultant Remuneration Ordinance, Lawyers’ Fees Act), which lay down binding requirements for the amount and structure of remuneration. The entitlement to remuneration generally arises upon provision of the respective service, unless otherwise agreed. If interim invoices, advance payments, or success-based remuneration components are planned, these must be clearly stipulated in the contract to avoid legal uncertainties and disputes.
What happens in the event of breaches of duty or substandard performance in a consultancy agreement?
If the consultant does not fulfill their contractual obligations properly, the client has a range of legal options. In addition to asserting claims for damages in the event of proven fault on the part of the consultant, (extraordinary) termination may be possible in some cases. In certain circumstances, there may also be entitlement to reclaim fees already paid (in whole or in part). Depending on the individual case and the severity of the breach of duty, further legal consequences may result—such as claims for compensation for use or claims for injunctive relief. In the case of consultancy errors in professions subject to special regulation, professional disciplinary sanctions may apply (e.g., by professional associations or supervisory authorities). Additionally, liability claims may exist, whose enforcement is governed by the general provisions of civil law. The burden of proof and demonstration regarding the breach of duty and the loss incurred generally lies with the client.
What special rules apply to consultancy agreements in dealings with consumers?
Where a consultancy agreement is concluded between an entrepreneur and a consumer, numerous consumer protection rules apply. These include information obligations under section 312d BGB or, in the case of distance contracts or contracts concluded outside business premises, the right of withdrawal under sections 355, 356 BGB. The consultant must inform the consumer about their right of withdrawal, contractual contents, and any potential costs clearly and understandably, and must provide the corresponding instructions. Furthermore, the contract may be subject to transparency and control requirements for general terms and conditions (sections 305 et seq. BGB). Failure to comply with these requirements can result in warnings, cease-and-desist and damage claims as well as the invalidity of individual contract clauses.
