Consultants often carry out work for a prospective client before any agreement is entered into. There is a myriad of reasons why consultants may do this. They may be hoping that if they do the work, the prospective client will feel obliged to engage the consultant for the project. Or, they might be busy and “just haven’t gotten around” to the formalities of entering into an agreement.
If you don’t end up engaging a consultant who has done work for you, do you have to pay? In a typical lawyer’s answer - it depends on the circumstances. Normally, if it appears as though the parties had an informal agreement or understanding that the consultant would be paid; the consultant would be entitled to payment.
In the case of D&K Drost Consult GmbH v Foremost Leisure (Holdings) Limited , project managers and architects carried out some preliminary work for a hotelier in relation to a proposed development in Hamburg, Germany. The hotelier ended up engaging different consultants, and a dispute arose as to whether payment was due to the original consultants. In finding that the hotelier was indeed required to pay, the courts noted that fees were being negotiated whilst the consultants were doing the work and that the hotelier had sent a formal letter offering €150,000 for the work that had been done.
If a consultant is doing preliminary work for you without suggesting that they expect payment for it (for example, if they are trying to secure future business from you), can you deal with them in such a way as to avoid having to pay? Yes, but you would have to be very clear that they were carrying out the work at risk and that no payments would be made if a formal agreement was not reached. Consultants may accept this when trying to win the work. However, if you wait until after you have engaged a different consultant to communicate your understanding that you will not be paying, expect the consultant to dispute it. It could be a costly mistake to make.