Master Service Agreements explained
No matter what service your business is providing, contracts are a crucial part of the process and making commercial contract negotiations move faster can be tricky. However, having a standardised Master Services Agreement (MSA) can be a game-changer when it comes to accelerating sales.
By using this, you can streamline the contract process and focus on what really matters - closing deals and building strong business relationships. In this article, we’ll break down everything you need to know about a Master Services Agreement, from identifying the right use for an MSA, to diving into the key parts of the contract.
What is a MSA used for?
Also known as Framework Agreement, MSAs are used as an alternative to Services Agreements. A Services Agreement is a one-off agreement designed for the provision of a single, specific service. Whereas an MSA provides a framework for the provision of services over a longer-term, designed to be flexible and adaptable to meet the changing needs of a business relationship between the customer and supplier.
The MSA itself is a comprehensive contract that establishes the overarching terms and conditions between the customer and the supplier. It sets the foundations for an ongoing business relationship by outlining general provisions, such as payment terms, intellectual property rights, dispute resolution, confidentiality and termination clause. The MSA is designed to then govern multiple projects between the parties, the details of which are set out in an individual Statement of Work (or ‘SOW’).
The SOW serves as an appendix to the MSA and acts as a work order for a specific service, project or deliverable. It will typically include specific details of that project including project objectives, timelines, milestones, pricing and any unique terms relevant to that specific project.
So, whilst the MSA provides the framework for the longer-term business relationship, the parties will agree new SOWs to specify the details of individual projects within that relationship.
What are the benefits of using an MSA?
Develop Long-Term Relationships
An MSA provides the framework for businesses to work together over a long period of time. By establishing the key terms and conditions upfront, it allows both parties to develop a mutual understanding of each other’s expectations and requirements, fostering trust and confidence in each other - and helping facilitate mutual success over time. This can help to align interests and forces open communication upfront, leading to a stronger working relationship that can withstand the ups and downs of long term projects.
It also helps to establish clear expectations and responsibilities for both parties, helping to minimise the risk of disputes arising in the future. By proactively addressing potential disputes and providing a structured means of resolving them, MSAs can help to promote healthy, long lasting business relationships.
If a dispute does occur, the dispute resolution process within the MSA provides a framework for managing it in a timely and effective manner, helping to preserve the relationship.
Efficiency and Flexibility
By defining the key terms and responsibilities in advance, you can save time and resources when it comes to subsequent projects and SOWs because you can avoid unnecessary renegotiations. If you want to add new services to the mix, you don’t have to start from scratch. Instead, you can simply submit and agree a new SOW that follows the existing MSA and you’re good to go! This means you can be more flexible and responsive to changing circumstances without having to worry about redoing the entire contract.
They are a great way to establish a solid foundation for a business relationship, while still maintaining the flexibility to grow and adapt with your business over time.
By carefully negotiating and defining important terms in the MSA, both parties can ensure that risks are properly allocated between them. For example, setting out the limitations of liability, intellectual property rights, dispute resolution and termination provisions, each party can protect their business interests from legal issues.
What should your MSA include?
Key terms within an MSA are:
Parties - identify and provide details of the customer and supplier involved
SOW Template - typically including the specific details of a project, services to be provided, milestones and deadlines
Responsibilities and Obligations - outline the responsibilities and obligations of each party, including what services will be provided, any requirements to provide information or equipment and any policies that should be followed by the parties
Payment Terms - including the payment schedule, invoicing procedures and any late payment fees
Intellectual Property Rights - this section should define ownership and use of any intellectual property developed or used in connection with the services provided
Confidentiality Obligations - how confidential information should be treated, who has access to it and for how long information should remain confidential
Changes - outline the way to make a change to the MSA or any SOWs via a formal process, including how changes will be requested, evaluated and approved
Liability - provide the liability of both parties for any losses or damages incurred as a result of the services provided, including any limitations and indemnities
Dispute Resolution Process - for resolving disputes that may arise under the MSA,including the process for initiating the procedure when there is a dispute and the steps involved in resolving it
Termination Rights - outline the circumstances under which either party may terminate the MSA, including any notice periods.
The MSA template on our platform covers all of these key terms, use the template as-is or customise to fit your specific needs. Also, did you know that you can pick and choose from our template library of over 400 templates? Get started for free