Scope creep and the cost of an informal engagement
A great many professional services disputes trace back to an engagement
that began informally, an email exchange, a verbal understanding, a one-page
proposal, without a document that clearly fixed the scope of work and the
process for adding to it. As the relationship develops, the client adds
requests that feel like a natural extension of the original brief and the
firm keeps delivering, until eventually a disagreement over fees exposes the
fact that neither side has the same understanding of what was actually
agreed. A properly drafted engagement letter, with a defined scope and a
clear change-order mechanism for anything beyond it, is the most effective
protection against this, and it costs considerably less to draft at the
outset than to litigate later.
Recovering unpaid receivables
Professional services firms are often reluctant to pursue unpaid invoices
aggressively, out of concern for the client relationship, and by the time
they do act, the amount owed has grown and the client has had time to
develop a narrative about why payment was withheld. A demand notice, followed
where necessary by a summary suit for recovery of a liquidated sum or, where
the engagement letter provides for it, arbitration, is the standard path.
Acting promptly, and keeping clear records of deliverables and approvals
throughout the engagement, materially improves the position if recovery
becomes contested.
Non-solicit terms and their real enforceability
Firms frequently want broad non-compete restrictions on departing
employees or consultants, but Indian courts have generally been reluctant to
enforce restraints that prevent someone from earning a livelihood after
employment ends, under the Indian Contract Act 1872’s restriction on
agreements in restraint of trade. Non-solicitation clauses, which restrict
approaching specific clients or employees for a defined period after
departure rather than restricting the individual’s ability to work at all,
are generally more likely to be enforceable, and firms are better served
drafting toward what will actually hold up than toward the broadest
restriction they can imagine.
Partner and founder exits
A partner or founder leaving a professional firm raises questions of
buyout valuation, client handover, and what restrictions, if any, apply to
the departing partner afterward, all of which are far easier to resolve if
the partnership deed or LLP agreement addressed them at formation rather than
being negotiated for the first time under the pressure of an actual
departure. Firms without a clear exit mechanism in their governing document
tend to find that the departure itself becomes the dispute, independent of
whatever disagreement prompted it.
