A Master Service Agreement or an MSA is a contract that defines the obligations of the two parties. Also known as MSA, it is the first agreement to be set up. In this article, we bring to you five essentials regarding MSA s, which are a must-know.
It is better to know the Essentials of Master Service Agreement. There is no ultimate MSA guide for all industries and states, as the preparation of an MSP depends on the case or the type of trade. Let us discuss some essential points to be considered when preparing your MSA.
The Importance of a Master Service Agreement
- Companies can decrease their chances of falling into litigation and avoid any contractual disputes if they have an MSA in place
- MSA guarantees that one party doesn’t have to take responsibility for the other party’s mistakes
- The agreement ensures that when one mistakes, it will be responsible for handling all the financial losses, and the other party is free of financial obligations. Indemnification is the legal term for this clause
- There are cases where it is mentioned in the MSA that even if the other party makes mistakes, only one party will hold full financial responsibility. The party shall also agree not to sue the other partner
- Resolving disputes are more accessible with an MSA, as the parties already know the terms and can quickly determine the fault.
The Right Method to Prepare an MSA
- If you incorrectly formulate your MSA, it might lead you to court
- Some IT businesses create MSAs by themselves, or sometimes they pull a template from the internet
- Some vendors can provide templates but may not properly customise them to cover the specifics of your business and your client’s needs
- Another crucial mistake businesses make preparing an MSA without getting them reviewed by an attorney Attorneys will review your papers once and ensure that you have covered all the legal and contractual terms.
- Vakilsearch, which is now transitioning into Zolvit, has business experts that can help you prepare an MSA by customising it for you as per your and your client’s needs. Also, our law experts will review the MSA contract thoroughly so you can focus on your core business. To prepare your perfect MSA, click here now.
Important Clauses to Cover in Your MSA
- Basic conditions: Your MSA must include the billing procedures, compensations, contract duration, and liabilities.
- Termination clause: You must include flexible termination clauses in your MSA rather than getting trapped when trying to leave a non–paying customer. You must include legal liabilities, potential breaches, and possible fines that allow you and your client to terminate the agreement easily. There is usually a two-week notice period that is added to the termination clause of an MSA, which means you must notify your client two weeks before the termination of the contract.
- Amendments and modifications: Your MSA must include managing amended documents, allowance of electronic communications, signatures, responsible parties, and proposed mechanisms for contractual changes.
- Scope of work (SOW). SOW can be included in the MSA or might be a separate document. It defines your service details and its pricing. The SOW must specify how much your client pays you for a specific set of services, projects, and hours. In case you amend the services or its scope for the client, only the SOW document needs to be amended and signed by both parties rather than the whole MSA.
Most Common Disputes and Risks With an MSA
- Death or injury of an employee: Unless you mention the details in the agreement, the parties involved will likely debate on whom to blame for such incidents.
- Property damage
- Failure to communicate: When one party does not respond to the requests made by another party for updates, and the party doesn’t respond timely.
- Failure to meet deadlines
- Failure to pay as agreed
- Performance or service issues
- Product defects
- Unauthorised charges: If there are any unauthorised payments made, it can cause one party to believe that the other is cheating on the agreement.
Some Helpful Clauses
- Hardware prepayment: Your customer can pay for the set up of one desktop while asking your customer to pay for ten desktops or a new server is unreasonable.
- Piracy termination clause: If your client uses unlicensed software, it might make you liable. In such situations, it would be beneficial to add a clause allowing you to terminate the contract in case of piracy.
- Client’s data termination: Your MSA must contain a clause that specifies that after the client leaves, you will store your client’s data at your premises for a given period, say, 30 days or longer, and then delete them unless it is subject to any regulatory compliance.
Bottomline
You must carefully outline your Master Service Agreement involving all important clauses. Be sure to review your MSA with an attorney. You must hire experts like Zolvit (erstwhile Vakilsearch) to help you prepare your MSA properly and hassle-free.
