Canada: IT Consulting Contract's Distinction With A Difference

One of the most important and fundamental aspects of every IT consulting agreement is also one of the greatest sources of legal misunderstanding and commercial risk for those transactions. Luckily, based on my experience, that all too frequent and formidable source of IT project risk is entirely (yes, completely) within the ability of IT customers to mitigate, if not entirely avoid, if handled well.

Those commercial and legal risks arise directly out of a pervasive, and yet deceptively simple, misunderstanding concerning the important differences between an "advisory" consulting service and a "deliverable" consulting service.1 The failure to appreciate and take that simple, yet profound, distinction into account lies at the heart of many of the most serious disputes and liabilities that arise in the course of IT consulting projects.

When an IT consulting transaction is structured as an advisory service, the consultant is retained to provide their expert, experienced and professional advice and assistance to the customer in support of a particular endeavour or to even facilitate a particular outcome. Although consulting services may be provided by world leading authorities in their relative fields, such retainers do not promise or guarantee any particular results, benefits or outcomes. All professional services that are advisory in nature must adhere to prescribed (and often onerous) standards of diligence, quality and care, whether those standards arise by contract, statute or the common law. However, the providers of advisory services never assume the risk of a failed outcome or result (except to the extent that such failure is caused or contributed to by the failure to adhere to the prescribed professional service standards) and the consultant will not be responsible for whether or not the customer's desired outcomes or business intentions are realized or achieved.

Common examples of advisory services (in the broadest sense) include: a law firm that is retained to help a corporation acquire another company, or to defend an accused at trial, or to negotiate a complex outstanding transaction; a surgeon who is retained to remove an infected appendix or to diagnose a particular illness; or, an IT consultant who is retained to help guide the customer through the prescribed process of configuring and implementing complex enterprise software. In each case, the service provider does not guarantee a particular outcome, is not promising a cure, is not assuming liability for a failed M&A transaction, and is not agreeing to serve as the customer's insurance policy for the customer's poor business decisions or any mistaken judgments that are undertaken during the course of the service retainer. Contrary to popular perception, there is neither inherently nor necessarily any liability associated with a surgeon's failed operation, misdiagnosis, or even for failing to remove a surgical instrument from a patient after an operation. On the contrary, as long as that surgeon did everything that a reasonably diligent and prudent surgeon should have done in comparable circumstances, then no liability will accrue to the surgeon for the failure of that patient's desired outcome to be realized.2 By analogy to such professional duties of care in the medical profession, subject to the consultant's compliance with all applicable duties of care in the performance of the services, the outcomes of IT consulting services that are strictly advisory in nature, will entirely be the customer's risk.

On the other hand, so-called "deliverable" consulting service agreements have (in many ways) much in common with product purchase agreements. In such deliverable transactions, a consultant is retained to provide far more than mere hands-on guidance, assistance and advice by guaranteeing that a specific or particular outcome, result or benefit will be delivered to the customer. By analogy, other deliverable retainers might include: fixing a roof so that it does not leak and will not leak for another 10 years; or, to build the house in complete accordance with the detailed requirements of architectural blueprint, engineering reports, and interior design specifications. In such transactions, the successful performance of a consulting agreement can only be determined by direct correspondence to the precise nature, scope and extent of how well the "deliverable" is defined from the outset. Since those transactions focus on the production of the defined deliverable, the professional quality of the services is irrelevant (and not a factor in any risk or liability assessment) as long as the outcome that is contracted for was delivered in accordance with the contract.

In my experience, it is the failure to contractually respect the clear demarcations in law and commerce between "advisory" and "deliverable" services where customers of IT consulting services most often fail to properly manage their consulting projects and transaction risks. As a fundamental matter of legal (and liability) distinction, the risks of either type of transaction can be managed well within the confines of their extremely different commercial and risk contexts. However, any contractual confusion between (or among) those very divergent risk contexts will very likely lead to a failure to manage the risks of either type of transaction, leaving both the customer and the consultant vulnerably exposed to unintended project risks. Unfortunately, customers who are not in a position (for many reasons) to materialize their otherwise vague or subjective expectations into a well defined and clearly articulated outcome or "deliverable" often mistakenly (and dangerously) want to structure their IT consulting procurement as a "deliverable" rather than more prudently and correctly as an advisory consulting service. In fact, the tendency to force an IT consultant into service obligations that appear to require "deliverable" obligations without being able to clearly define all of the requisite requirements and necessary attributes of such transactions, often creates many more project risks and transactional liabilities than customers appreciate or realize – hence the recommendation in the above title that customers need to be very careful of what they ask for.

To properly manage the risks of "advisory" consulting services, customers should strictly focus on the following important contractual provisions:3

  1. clearly stipulate the nature, scope and quality of the professional standards of care that must be exercised by the consultant;
  2. stipulate quality assurance obligations and protocols to promote service excellence;
  3. stipulate all applicable personnel/consultant qualifications, experience, security clearance, training, and other relevant attributes;
  4. mitigate against personnel transfers to promote service consistency and continuity of project knowledge and experience;
  5. ensure there are frequent reviews of services quality performance, especially concerning project progress;
  6. include provisions that promote consultant customer communications, including stipulations related to timely customer decisions, determinations and instructions to the consultant; and,
  7. include an express disclaimer and denial of any representation, warranty, covenant or guaranteed outcome, result, or that any particular solution will be fit for a particular purpose.

For customers who wish to properly manage the risks of "deliverable" consulting services, then those customers should focus on the following contractual provisions:4

  1. (this is the golden rule...) the less completely, accurately and clearly the deliverable is defined, the greater the risk will be of project failure.5 If the customer is not in a position to define the deliverable thoroughly and clearly, then that customer is not (in the customer's own best interests) in to enter into a deliverable consulting agreement – although that customer may be in an excellent position to retain a consultant to provide advisory assistance to help define the deliverable that the customer will require for a future "deliverable" transaction;
  2. provide deliverable development/delivery milestones, which are perhaps (but not always) tied to fee payment thresholds;
  3. ensure there is deliverable (in part or whole) acceptance testing based on the empirical qualities of the contractual definition;
  4. explicitly set out all of the customer's material decisions, contributions, determinations and governance duties upon which the creation of the deliverables depend and rely;
  5. deliverable change management provisions must be included to deal with requested amendments to the contracted definition of guaranteed outcome;
  6. stipulate all related services that are associated with the delivery, implementation or use of the deliverable, such as training, maintenance and support, integration with other IT, or associated advisory advice; and,
  7. even though the deliverable must be well defined, it is reasonable and customary to include pre-conditions, exclusions, assumptions, and prerequisites upon which the production and delivery of the defined outcome materially depends. However, as noted below, such service performance "hedging" can never be a substitute for properly and thoroughly defining the outcome that the customer requires the consultant to promise.

As noted above, the real danger for IT consulting projects will arise, and associated risks greatly exacerbated, when a customer (who is not in a position to provide all of the empirical specifications, requirements, or specifications for the desired outcome that they want), requires the IT consultant to enter into a deliverable transaction and (therefore) assume the risk for the failed production of an undefined deliverable. Since the most fundamental risks of a deliverable project are that the required "deliverable" will either be not produced, will exceed the agreed upon budget, or will become irrelevant due to project delays, it is absolutely essential to completely, accurately and clearly define the "deliverable" in empirical terms. Unless that is first done, the customer's risks associated with "getting what it has paid for" (value for money); knowing what decisions a customer must make throughout the services; the required personnel and professional expertise; the price of the deliverable; how long it will take to produce the deliverable; and, what deliverable changes or compromises may be required during the service term, are going to be beyond each party's operational management or control.

To focus on one of the examples referred to above, consulting services to assist with the configuration and implementation of complex enterprise software into an operational solution that will ultimately satisfy a customer's business and technical requirements can be structured in either one of two ways to prudently and properly minimize IT project risk: either as an advisory service; or, as a deliverable service. In my experience, customers who dare to confuse that essential legal and commercial distinction by trying to push the square peg of an undefined ERP outcome into the round hole of a deliverable transaction are inviting exorbitant IT project risk. Attempts by customers to deviate from those fundamental legal and commercial structures by forging a middle ground of risk allocation by artificially propping up an undefined deliverable outcome with a litany of contractual assumptions, preconditions, exclusions and qualifications to the (otherwise) promised delivery of such unknown (or as yet undetermined) deliverables is a highly dangerous risk game for both the customer and the consultant. That approach absolutely fails to address (if not ignore) the most serious and fundamental root origin of transactional risk in that circumstance – the failure to comprehensively and clearly define the outcome that the customer is insisting that the consultant deliver. Essentially, such a patchwork approach to risk management dangerously relies on the untenable and uncertain correspondence between the consultant's delineated service performance hedging (assumptions, pre-conditions and qualifications) and the nature of the customer's unmet (and uncertain) outcome expectations – and the less those correspond, the closer both parties will be to the very centre of a liability bulls eye.

Instead of untenable and ineffective attempts to manage risk by ignoring the root cause of project failure when the outcome deliverable is not yet known or defined, there are two rapidly developing best practices for IT consulting risk management that will greatly promote the success of a customer's IT project:

  • First, customers are now better understanding and appreciating the (increasingly) obvious risks of entering into so-called deliverable IT consulting transactions before they are ready to do so, i.e. when they are unable to clearly, completely and contractually define the outcome that is required in empirical terms – whether in business, operational, technical or other terms. That means that more effort, time and expense is increasingly being devoted to the planning, preparation and readiness of such deliverable transactions – mostly to ensure that deliverable contracts (with all due allocation of risk and liability) can be entered into.
  • Second, IT consultants are more aggressively helping their customers understand and appreciate that such profound project risks can be greatly mitigated, if not avoided, by first providing their customers with the advisory and consultative assistance and guidance their customers require to thoroughly and clearly define the precise results and outcomes they seek, in contractual, empirical and commercial (time, expense, and innovative) terms. Customers may not appreciate what they don't know about all of their desired outcome options, possibilities or pitfalls at the outset of an IT project, and such advisory consultative services can be focused on optimally defining an "outcome oriented" IT project to drastically lower the risk profile of those projects when commenced.

Indeed, customers must be very careful what they ask for and demand of their IT consultants. If it is industry advice and consultative guidance that they require, then erroneously structuring those services as an "outcome guarantee" will rarely leave IT customer satisfied. If the IT consulting service is, in fact, best designed to deliver a particular outcome, then the IT customer must ensure that such deliverable is very clearly, completely and empirically defined, and subject to all of the contractual protections and stipulations addressed above.


1 To a great extent, many of the risk management issues identified and discussed in this Update concerning consulting services are common to many other IT service contracts. However, in the interest of clarity and illustration, I have decided to focus herein on only IT consulting agreements.

2 A surgeon owes a patient the duty to adhere to the standard of practice in his area of specialty. With regard to the example cited above, in a hospital setting that requires a surgeon to adhere to the policies and procedures set out for the performance of surgery such as a sponge and instrument count at the end of the surgery. It is the hospital's responsibility to have a policy in place that sets out the requirement to perform a sponge and instrument count prior to the onset and at the conclusion of abdominal surgery. The surgeon is entitled, in law , to rely on the advice of hospital personnel regarding if the count is correct or incorrect. If hospital personnel determine that a sponge(s) or instrument(s) (foreign body) is missing and so advises the surgeon, the duty of care requires the surgeon to take the necessary steps to ascertain if the foreign body has been left in situ. The standard of care would require the surgeon to visually check the operative field to determine if he can visualize the foreign body. If nothing is found, the surgeon would be expected to order investigations such as an x-ray to confirm that the field is clear. A note should appear in the surgeon's operative report as well as a note by hospital personnel on the count sheet that the count post op did not match the count pre operatively and what investigations were undertaken or planned to determine that nothing was left in situ.

3 This is not intended to be an exhaustive list of risk management strategies for advisory consulting services, but merely a representative delineation of several "best practice" approaches for consideration.

4 This is not intended to be an exhaustive list of risk management strategies for deliverable consulting services, but merely a representative delineation of several "best practice" approaches for consideration.

5 This is true for many reasons, including: reduced vendor agreement for deliverable outside their ability; better pricing; better time expectations; empirical (rather than subjective) assessment criteria; evidence of definition misunderstandings; etc.

6 Parties should not confuse advisory consulting agreements to assist the customer reaching the customer's desired, expected or intended outcome as "deliverable" contracts – they are not. Surgeons and lawyers always assist their patients and clients toward an outcome that is desired by the patient or client – but such services are never provided on a "deliverable" basis where the surgeon and the lawyer agree to assume the risk of the patient/client outcome regardless of the professional quality of their services.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on

Click to Login as an existing user or Register so you can print this article.

In association with
Related Topics
Related Articles
Related Video
Up-coming Events Search
Font Size:
Mondaq on Twitter
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
Email Address
Company Name
Confirm Password
Mondaq Topics -- Select your Interests
 Law Performance
 Law Practice
 Media & IT
 Real Estate
 Wealth Mgt
Asia Pacific
European Union
Latin America
Middle East
United States
Worldwide Updates
Registration (you must scroll down to set your data preferences)

Mondaq Ltd requires you to register and provide information that personally identifies you, including your content preferences, for three primary purposes (full details of Mondaq’s use of your personal data can be found in our Privacy and Cookies Notice):

  • To allow you to personalize the Mondaq websites you are visiting to show content ("Content") relevant to your interests.
  • To enable features such as password reminder, news alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our content providers ("Contributors") who contribute Content for free for your use.

Mondaq hopes that our registered users will support us in maintaining our free to view business model by consenting to our use of your personal data as described below.

Mondaq has a "free to view" business model. Our services are paid for by Contributors in exchange for Mondaq providing them with access to information about who accesses their content. Once personal data is transferred to our Contributors they become a data controller of this personal data. They use it to measure the response that their articles are receiving, as a form of market research. They may also use it to provide Mondaq users with information about their products and services.

Details of each Contributor to which your personal data will be transferred is clearly stated within the Content that you access. For full details of how this Contributor will use your personal data, you should review the Contributor’s own Privacy Notice.

Please indicate your preference below:

Yes, I am happy to support Mondaq in maintaining its free to view business model by agreeing to allow Mondaq to share my personal data with Contributors whose Content I access
No, I do not want Mondaq to share my personal data with Contributors

Also please let us know whether you are happy to receive communications promoting products and services offered by Mondaq:

Yes, I am happy to received promotional communications from Mondaq
No, please do not send me promotional communications from Mondaq
Terms & Conditions (the Website) is owned and managed by Mondaq Ltd (Mondaq). Mondaq grants you a non-exclusive, revocable licence to access the Website and associated services, such as the Mondaq News Alerts (Services), subject to and in consideration of your compliance with the following terms and conditions of use (Terms). Your use of the Website and/or Services constitutes your agreement to the Terms. Mondaq may terminate your use of the Website and Services if you are in breach of these Terms or if Mondaq decides to terminate the licence granted hereunder for any reason whatsoever.

Use of

To Use you must be: eighteen (18) years old or over; legally capable of entering into binding contracts; and not in any way prohibited by the applicable law to enter into these Terms in the jurisdiction which you are currently located.

You may use the Website as an unregistered user, however, you are required to register as a user if you wish to read the full text of the Content or to receive the Services.

You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these Terms or with the prior written consent of Mondaq. You may not use electronic or other means to extract details or information from the Content. Nor shall you extract information about users or Contributors in order to offer them any services or products.

In your use of the Website and/or Services you shall: comply with all applicable laws, regulations, directives and legislations which apply to your Use of the Website and/or Services in whatever country you are physically located including without limitation any and all consumer law, export control laws and regulations; provide to us true, correct and accurate information and promptly inform us in the event that any information that you have provided to us changes or becomes inaccurate; notify Mondaq immediately of any circumstances where you have reason to believe that any Intellectual Property Rights or any other rights of any third party may have been infringed; co-operate with reasonable security or other checks or requests for information made by Mondaq from time to time; and at all times be fully liable for the breach of any of these Terms by a third party using your login details to access the Website and/or Services

however, you shall not: do anything likely to impair, interfere with or damage or cause harm or distress to any persons, or the network; do anything that will infringe any Intellectual Property Rights or other rights of Mondaq or any third party; or use the Website, Services and/or Content otherwise than in accordance with these Terms; use any trade marks or service marks of Mondaq or the Contributors, or do anything which may be seen to take unfair advantage of the reputation and goodwill of Mondaq or the Contributors, or the Website, Services and/or Content.

Mondaq reserves the right, in its sole discretion, to take any action that it deems necessary and appropriate in the event it considers that there is a breach or threatened breach of the Terms.

Mondaq’s Rights and Obligations

Unless otherwise expressly set out to the contrary, nothing in these Terms shall serve to transfer from Mondaq to you, any Intellectual Property Rights owned by and/or licensed to Mondaq and all rights, title and interest in and to such Intellectual Property Rights will remain exclusively with Mondaq and/or its licensors.

Mondaq shall use its reasonable endeavours to make the Website and Services available to you at all times, but we cannot guarantee an uninterrupted and fault free service.

Mondaq reserves the right to make changes to the services and/or the Website or part thereof, from time to time, and we may add, remove, modify and/or vary any elements of features and functionalities of the Website or the services.

Mondaq also reserves the right from time to time to monitor your Use of the Website and/or services.


The Content is general information only. It is not intended to constitute legal advice or seek to be the complete and comprehensive statement of the law, nor is it intended to address your specific requirements or provide advice on which reliance should be placed. Mondaq and/or its Contributors and other suppliers make no representations about the suitability of the information contained in the Content for any purpose. All Content provided "as is" without warranty of any kind. Mondaq and/or its Contributors and other suppliers hereby exclude and disclaim all representations, warranties or guarantees with regard to the Content, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. To the maximum extent permitted by law, Mondaq expressly excludes all representations, warranties, obligations, and liabilities arising out of or in connection with all Content. In no event shall Mondaq and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use of the Content or performance of Mondaq’s Services.


Mondaq may alter or amend these Terms by amending them on the Website. By continuing to Use the Services and/or the Website after such amendment, you will be deemed to have accepted any amendment to these Terms.

These Terms shall be governed by and construed in accordance with the laws of England and Wales and you irrevocably submit to the exclusive jurisdiction of the courts of England and Wales to settle any dispute which may arise out of or in connection with these Terms. If you live outside the United Kingdom, English law shall apply only to the extent that English law shall not deprive you of any legal protection accorded in accordance with the law of the place where you are habitually resident ("Local Law"). In the event English law deprives you of any legal protection which is accorded to you under Local Law, then these terms shall be governed by Local Law and any dispute or claim arising out of or in connection with these Terms shall be subject to the non-exclusive jurisdiction of the courts where you are habitually resident.

You may print and keep a copy of these Terms, which form the entire agreement between you and Mondaq and supersede any other communications or advertising in respect of the Service and/or the Website.

No delay in exercising or non-exercise by you and/or Mondaq of any of its rights under or in connection with these Terms shall operate as a waiver or release of each of your or Mondaq’s right. Rather, any such waiver or release must be specifically granted in writing signed by the party granting it.

If any part of these Terms is held unenforceable, that part shall be enforced to the maximum extent permissible so as to give effect to the intent of the parties, and the Terms shall continue in full force and effect.

Mondaq shall not incur any liability to you on account of any loss or damage resulting from any delay or failure to perform all or any part of these Terms if such delay or failure is caused, in whole or in part, by events, occurrences, or causes beyond the control of Mondaq. Such events, occurrences or causes will include, without limitation, acts of God, strikes, lockouts, server and network failure, riots, acts of war, earthquakes, fire and explosions.

By clicking Register you state you have read and agree to our Terms and Conditions