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Master Services Agreement

Updated: August 2, 2022

Est. Reading: 6 minutes

It is not easy to speed up a commercial contract negotiation. Even so, you can get the right master service agreement in place so it can help you to speed up discussions and you can address any concerns that can help you to speed up discussions and address any concerns so you can be able to speed up the sales process, and go back to managing your business.

So, how do you make sure to get your master agreement right the first time? What would you need to have in place so you can protect yourself from any bad surprises in the future? It all starts with understanding what is a master services agreement, knowing what it entails, and understanding why you need one.

There are times that a contract will cover the one-time action between parties not minding the relationship and circumstances of their transaction over time. When individuals that want to do business together understand that they would want to work with one another for some time putting a master services agreement (MSA) can help in simplifying their future agreements and it will help in speeding up the negotiation process.

When you have an MSA in place you do not need to renegotiate additional contracts and the basics of the initial agreement can be included in all future contracts. Even though the tech industry frequently uses MSAs these kinds of agreements are appropriate for individuals and businesses that want to form a long-term partnership or business relationship.

What Is a Master Service Agreement?

A master service agreement is also known as a framework service agreement is a contract drawn between a customer and a service provider that sets out the terms of engagement in their future business or work together. The document outlines the process of paying, contracting, and requesting work that has not yet been determined.

Most of the terms but all of the terms between the involved parties will be laid out in a master service agreement. The purpose of the agreement is to help ensure that the process of agreeing on future contracts is speedy and simple. Thins that will be spelled out on a master service agreement are payment terms, intellectual property rights, delivery requirements, warranties, and dispute resolution processes.

MSAs are useful in business-to-business transactions where the services that are provided are in accordance with the statement of work. For example, the MSA can set the framework under which a customer can make an order from a service provider without them needing to negotiate a future agreement or contract from scratch every time.

Why Would I Need a Master of Services Agreement?

When small businesses want to move swiftly from one contract to another most of the time they use contractual templates, or cut and paste provisions. It is possible for there to be an opportunity for a partnership that suddenly occurs or for there to be a potential client that would like to immediately see a nonstandard service. When a master service agreement is being implemented companies do not have to deal with any issues that some form contracts that are not well drafted. A master service agreement is put in place so companies do not have to deal with issues that can arise as a result of a not-so-well constructed contract.

When you have an MSA as a company it will assist your company to reduce the chances of litigation and contractual disputes. Also, when you have a master service agreement in place you have to keep in mind that things are ever-changing and as a company, you should monitor these changes so you can make amendments where necessary.

business documents being reviewed, Master Services Agreement

 When businesses are coming together to make a deal there is a party that avoids taking responsibility for mistakes that are likely to be made by the other party. With an MSA in place, you will be able to guarantee that if one of the parties messes up they will take care of the financial losses caused by the mistake. The other party will not be held at fault and they will be free of financial obligations. Being responsible for the entire liability when at fault is legally referred to as indemnification.

Related Content: Should Business Partners Sign Non-Compete Agreements?

In certain cases, a party can take on all of the responsibilities. The party will sign an MSA that gives the other party the fullest extent of the payment obligation for any mistakes committed even if the other party makes them do it. The party can take up the legal fees obligation with respect to their confidentiality agreement and they agree not to not suing them.

Risk allocation is important. When businesses have a master service agreement the new deal will affect the existing contracts. Insurance agreements are really crucial. To protect the parties involved an MSA outlines the risk that each company takes. The responsibility of each party will be outlined in the MSA for the entire period of the project. It is easier to resolve disputes when you have a master service agreement in place. This is because every party involved already knows their indemnification obligation and fault can be determined quickly.

What’s Included With a Master Services Agreement

When you are drafting an MSA there are four areas that the agreement should focus on. That is;

  • What your company must do.
  • What the other company must do.
  • The responsible issues that either party is likely to face.
  • What both companies will do together.

When the details are listed down the parties getting into the joint venture can honor their side of the master service agreement. It is important to decide on the potential issues in advance. This is because the business world has a lot of potential problems and it is important to have a resolution. When two companies come together it is important for them to plan on potential consequential damages that a business can face from third-party service providers or other factors.  The MSA can have;

Project management. If neither side decides who is in charge things will not go well. It is important to understand their respective obligations.

Background checks. The agreement is supposed to list requirements for potential employees that would want to work under the company.

Delivery and Installation.  It is important for the agreement to state when a product should be shipped and who is supposed to be responsible for setting it up the first time.

Terms of payment. It should be made clear in the MSA when one party is going to pay, how often they will make the payment, and how long the payments will go on.

Taxes and tax responsibilities. When the businesses have established taxes they should make a choice on how they are to split the tax expense.

Insurance. Both parties should have an agreement on how they should handle their insurance coverage and expenses. When they fail to do this and face a setback they may have to solve things legally.

Government requirements. The parties involved should have an agreement on the geographic location where they will work on their project. For the issue to be settled they will need to settle any city, state, and federal tax implications.

These are just a few issues that you will find in a master service agreement. At Monahan Law Firm we would like to advise you and give a detailed report of issues that you should include in your master service agreement. We are aware of business laws in Glendale, Arizona, and have worked with small businesses to help them find remedies for breach of a contract and well helped them craft their own contracts and we can help you draft your MSA.

lawyers reading out of a book in front of a laptop, Master Services Agreement

It is necessary to consider the relationship between the master of agreement and the statement of works as well as any other future applicable documentation. 

A statement of work (also known as a call-off contract) function is to act as an order to create a legally binding agreement between involved parties. This contract is entered into after the framework agreement that specifies the exact nature of the work that needs to be conducted and the crucial terms. In a statement of work, you can find information that specifies how a customer will pay in installments based on how different milestones that a project has.

In the case where a client has requested build or development services, you can find an acceptance clause in the customer content section of the MSA. Acceptance testing is where a product is tested for errors and compliance with the specification that has been agreed upon.

Related Content: Breach of Contract in Business Partnerships

Conclusion

A well-drawn-up master service agreement should be able to anticipate scenarios that can occur as a result of two businesses partnering on a project and should offer solutions to these issues. It is important for the MSA to provide the project manager with clear guidance on how they can navigate through these issues. Along with the MSA, it is important to have a management guide which is a separate document that acts as a user manual for the staged conflict resolution that has been stated in the master services agreement.

As a legal professional service, we know the complexities involved in drafting a well-thought master services agreement and we can help you ensure that the key terms in your business have been addressed in the entire agreement. Call an experienced business lawyer and tell us about your business needs today at Monahan Law Firm, PLC. Let us help you find a sole remedy by offering you our reasonable assistance.

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Attorney Patrick Monahan

Patrick Monahan

Patrick Monahan is the managing partner of Monahan Law Firm, PLC. Patrick began his legal career practicing real estate, construction, and general business litigation.
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