Master Service Agreements: Everything You Need to Know

A Master Service Agreement, or MSA, is a contract between a service provider and a consumer in which the parties agree on the broad parameters of their interaction. The MSA serves as a foundation for the work orders, statements of work, and other more comprehensive papers that the parties will enter into over time, but it does not and is not intended to encompass the project’s specifics (s).

The Benefits of an MSA

The primary benefit of an MSA is that once agreed upon, the broad parameters regulating the partnership do not need to be renegotiated for each new project. This saves both parties time and resources, allowing them to concentrate on the specifics of each job.
For those organisations having affiliates, the MSA may additionally give the benefit of enabling such affiliates to get services from the service provider under the MSA by merely entering into a statement of work or work order, if so agreed in the MSA. Allowing affiliates to utilise the MSA is typically beneficial to everyone. The client and its affiliates may acquire services under consistent conditions without having to go through long discussions, and the service provider boosts its chances of obtaining the affiliates’ business in addition to the original customer’s.

Terms Typically Covered by an MSA

Definitions

Term and Termination: Each party’s initial term, renewal, and termination rights.

Confidentiality

Payment terms include the frequency of invoicing, payment deadlines, and the repercussions of nonpayment.

Intellectual Property Rights: Who owns what portion of the services delivered?

Warranties and representations: The service provider should give warranties at the very least for the quality of the services.

Disclaimers

Indemnity: The service provider should at the very least offer indemnification in the event of carelessness, third-party claims, or infringement.

Restriction of Responsibility: Any limitation of liability should exclude breaches of representations and warranties, as well as infringement. Ascertain that each party’s (rather than just one party’s) liability is adequately circumscribed.

Insurance Prerequisites

Dispute Resolution and Applicable Law

Exhibits such as a service level agreement might also be included in the MSA (SLA)

The Relationship Between a Master Service Agreement and a Statement of Work:

Whereas the MSA establishes the broad conditions of the partnership, the statement of work or work order (SOW) is where the specifics of each project (description, delivery dates, pricing, etc.) are negotiated and recorded. A single MSA may and generally does include a number of SOWs. Each SOW is normally subject to the provisions of the MSA, however there may be disputes between the MSA and the conditions of a SOW. A well-drafted MSA will contain a clause that addresses such possible conflicts by specifying which document will take priority over the other (i.e order of precedence).

The order of precedence clause might give the MSA or the SOW priority. As a result, it is critical that each time the parties enter into a SOW I they are familiar with the order of precedence agreed to in the MSA and (ii) that each SOW is reviewed by a legal professional prior to signature to ensure that the parties are aware of any conflicts between the MSA and SOW, have knowingly agreed to them, and have clearly stated that their agreement differs from the terms of the MSA. It is important to note that any provisions agreed upon in a SOW apply solely to that SOW and not to any others entered into under the MSA.