The Master Service Agreement (MSA) is one of the most common contracts used in long-term relationships or when one company has to work on a specific project or several projects with another company. To know more about it, read the article.
A master service agreement, or MSA, is a contract between two parties in which the parties agree on the majority of the terms that will govern future transactions or agreements. A service agreement enables the parties involved to negotiate future transactions or agreements more quickly.
This is because they can rely on the strong foundation of the master agreement for future business, so the same terms do not need to be negotiated repeatedly, and you only need to negotiate terms specific to the latest deal.”
A master’s service is very common in the professional services industry.
- It enables you to work with the service provider on a project-by-project basis without having to re-negotiate and re-sign off on how you and that provider will treat each other
- In this way, it serves as the foundation of the ongoing relationship, regardless of what project they’re working on and how they’re working on it, or even if they’re in between projects for the time being
- Our master service agreement is the agreement between us and our clients on what we value and how we will behave in a healthy, ethical, and mutually beneficial business relationship.
Types of Terms & Conditions Used in MSA Agreement
Every company’s legal department probably has slightly different ideas about what should or should not be in an master service agreement, but if you’re going to hire a professional services team, chances are there will be some common ground and terminology you’ll need to understand.
Although the titles and formatting may vary from case to case, any master service agreement you or your company will be reviewing from a professional services firm may contain any or all of the following sections:
- A section describing what the Master Service general terms cover or do not cover in terms of project-specific agreements such as statements of work
- Terms of Confidentiality
- Rights to Intellectual Property
- When, how, and how much the relationship can be discussed or disclosed
- The conditions under which the work will be done;
- How the client will review, reject, or approve deliverables
- What each party will be responsible for providing or maintaining throughout the term of the services agreement
- Consequences/implications of either party failing to comply with terms of the agreement
- Agreement to refrain from soliciting each other’s employees or clients
- Procedures for resolving legal disputes
- Indemnification provisions in the event that either organization is sued by a third party
- Warranty or support information for work performed by the firm for the client
- Insurance and/or security requirements for the service provider (and possibly the client)
- Expectations about how the money, fees, expenses, and payments will be handled
- Language relating to the MSA agreement’s term and how either party can terminate a specific statement of work, as well as how either party can terminate the master service agreement if necessary.
11 Conditions to Expect in Master Service Agreements
Now that you have a better understanding of what this type of agreement entails, let’s break down each of these sections to give you a better idea of what terms to expect and why they are important.
1. General Terms
First and foremost, there should be a section that clearly states that the Master Services Agreement exists in addition to contracts for specific services that you’ll be hiring the firm to perform with your company over time.
To put it another way, this is distinct from the terms and conditions of future individual projects. A Master Service is not the same as a work order or a statement of work.
Each project that a service provider provides to their clients – such as team training, website development, software implementation, and so on – is negotiated in a statement of work (SOW), which is a project-specific companion to our Master Services Agreement.
This specifies the problem to be solved for each individual project, what is in scope or out of scope, the team involved, key dates and milestones, the total price, the billing schedule, and so on.
The first section of the master service agreement could state that the statement of work between the service provider and the client is for this purpose.
2. Mutual Confidentiality
We need a section in a master service agreement that ensures confidentiality protection because we’re dealing with client data and working so closely with their leadership teams on details of their sales, marketing, and overall future company growth strategy.
Firms, on the other hand, will frequently be training, consulting, or implementing with clients in a way that requires us to share unique aspects of how we successfully operate.
Because what clients can learn from our unique experience is extremely valuable, we expect mutual confidentiality protection for what we share.
Typically, no confidential information needs to be shared with a firm during the sales process in order to assess a mutual fit, so a master service agreement or NDA (Non-Disclosure Agreement) is not required.
3. Intellectual Property Rights
A section on intellectual property rights typically describes who owns/retains rights to distinct processes and/or deliverables before, during, and after the work is completed.
It addresses who owns the deliverables/work and how the service provider transfers ownership rights upon acceptance. It also specifies who owns the processes and/or tools used to create the deliverables, which are commonly referred to as a firm’s intellectual property (IP).
In that sense, we’re similar to a “knowledge factory,” constantly transferring know-how and digital assets to a client organization through a series of collaborative projects.
With this in mind, there may be language in a master service agreement stating that a client is not permitted to copy certain proprietary tools or processes from the service provider and reuse them with other companies that are not parties to this master service agreement, at least not without permission. It’s a minor distinction, but it could be critical to the future success of the firm you’d be working with.
4. Relationship Disclosure
If you’re considering working with a professional services firm, you’ll probably want them to share examples of similar work they’ve done for companies with similar needs or goals as yours. Many legal departments flag this section for further discussion because they are concerned that something the client does not want to be published will be published.
As a compromise, you could include language requiring the service provider to obtain your written approval before certain aspects of your collaboration are featured in public-facing material. Service providers with whom you may negotiate may be willing to accept this compromise.
5. How the Work is Performed
It is common in MSAs to include a section that specifies what each party will be responsible for providing throughout the duration of the relationship in order for the work to be completed successfully.
It’s critical to discuss these obligations upfront so that everyone understands what they’re agreeing to.
There are some conditions that both parties are likely to agree on. For example, each party is responsible for bringing qualified personnel to collaborate on the work (and performing the work in a timely, professional manner).
In addition, each is responsible for the timely delivery of their text, graphics, logos, images, copy, photographs, and any other related input requirements required for your firm to perform the services you hired them to perform.
Another critical piece of language here is a language that confirms that both parties own the rights to any content, data, images, or inputs of any kind that they share with each other to use in performing the work together – and that no use of any inputs shared by either party would violate any type of law or pre-existing agreements that either organization must comply with.
6. Settling Disputes
A well-thought-out MSA should include at least one section outlining the steps that will be taken. The language used here could range from how parties should communicate to how escalation is handled up the chain of command to what will happen if there is a legal dispute. Expect the parties to agree on when, where, and how they will handle each situation.
Look for terms in your MSA that cover who is liable or “indemnified” for any third-party claim that may arise as a result of the work and or deliverables.
7. Involvement of Third Parties
As the world becomes more digital and connected, it’s natural to think that some services will be dependent on the products and services provided by third parties, such as search engines, website hosts, domain registrars, advertising platforms, email service providers, and social media sites. Printers and content management systems are also examples of third-party products and services that may be used.
You and the company you’re working with should be clear about all the third-party systems and who’s in charge of what.
There should be a clause here that says that the firm you’re contracting with will not be responsible for the actions or omissions of third parties, or their end-users, that they can’t control. This should be in the contract you sign.
For example, they shouldn’t have to pay for things like Facebook going down or a major outage for a key software platform like HubSpot, because those things aren’t their responsibility.
The MSA Agreement should also cover who is and isn’t liable for the operation of third-party systems. You should also expect to be financially responsible for and pay for any miscellaneous or third-party fees or costs for those platforms, such as software license fees, website hosting and domain registration fees, subscriptions (such as HubSpot or others), printing and production costs, and website design or website update costs.
8. Warranty & Support Information
Once the deliverables are given to the clients and they learn how to use them, these deliverables should be used for a long time after the project to build them is done.
Thus, these assets are handled by many people and may be changed or tweaked by the client’s staff in ways that the agency can’t always stop.
Another thing is that things like templates or program codes can also be stored in places like Google Drive or Dropbox, which are not “future-proof,” no matter how smart we made them.
There needs to be a reasonable expectation of how long the agency that made the tool you’re now using will keep it up and running. This is why
9. Insurance Coverage
This section is very important because it needs to explain and make sure that the company has enough insurance to cover the risks of the project.
These are some of the types of insurance that businesses have and that we show in our MSA:
- General Liability Coverage of $2M per occurrence with a $4M annual limit
- Umbrella Coverage includes an additional $10M of coverage
- Workers’ Compensation coverage for each occurrence of up to $500,000
- Errors & Omissions coverage of $1M
- Cyber Security Liability Coverage of $1M.
Based on the nature of the work you’re looking to outsource, you may want the company to get more insurance.
If you’re working with a service provider and you don’t know what kind of insurance they should have in place for the work they’ll be doing with you, you should get help from a lawyer or a qualified insurance broker before you make any decisions.
10. Working of Money
If the company you’re hiring is in a state or country that has unique tax rules, you should pay attention to that.
- Is the service company based in the same state or country as your own business?
- If so, are there any other local laws that need to be taken into account?
- How will the travel costs for the company you’re hiring be paid for?
- What happens if your company is late on a payment? Will work stop? Will there be late payment charges?
Make these points clear by adding words to the master service agreement. A service provider might not have to fly consultants out to do team training, group workshops, and on-site film production with clients all the time, but they do. They explain how these costs will be paid for in the MSA.
11. Termination of Agreement
In the end, all things must die, but they should die a good death. Both parties should be able to predict how things will end for them. There should be language in every MSA about how to write down what you’re going to do and how to get out of the MSA. To be fair, both sides should be given some time to prepare.
Our team has reviewed a lot of MSAs with clients over the years, and we’ve learned one big thing. The MSA isn’t just a legal document that should be ignored until the end of the sales process. It should be seen as an important part of the process.
Because any company that wants to work with you will make time to meet with you and your legal team (if necessary) to go over any part of the MSA you want to talk about. It’s so important.