Paradigms of Business Consulting Agreements

Abstract

Business consulting represents one of the most important activities in the service economy, yet its contractual arrangements have rarely been analysed. Various scandals linked to professional consulting in recent times, such as the accounting scandal surrounding the German DAX-company, Wirecard, or the 'Luanda Leaks', give reason for a closer look at this activity, as well as the corresponding contractual agreements. Additionally, the regular functioning of consulting agreements is largely undiscussed. The aim of this contribution is (1) to highlight the essential problems of business consultancy contracts, namely the informational advantage of the consultant with regard to the quality of advice and price; structural conflicts of interest, especially in the case of business consultancy by auditors; the possibilities of abusing consultancy contracts for personal gain, as well as the liability of the consultant and the exemption of management from liability through the use of consultants; and (2) to propose solutions to these problems using the existing rules of due diligence and collateral duties, especially by applying general norms in the light of the economic function of management consultants as brokers for knowledge and know-how.