A contract is made between any two parties that enter into a service transaction, and such a contract is called a Master Service Agreement (MSA). The MSA is an agreement that details the expectations of both parties. This article brings a detailed view of MSA.
What does a Master Service Agreement mean?
A Master Service Agreement is a contract between two parties that will enter into a service agreement and settle major details and expectations of both parties. The MSA mentions what each party has to do to honour the end of the bargain. The services that apply in the MSA are also mentioned clearly in the contract. The Master Service Agreement is also known by the term Service Level Agreement (SLA).
What Is the Primary Objective of a Master Service Agreement?
The primary goal of an MSA is to process the contract faster. Businesses often use MSAs to make current and future contract negotiations simpler. If the parties do not wish to have an MSA, the customers and the company can still work through the issues, but certain big concerns can derail the contract. Companies are, however, advised to have an MSA before having a specific contract to focus on their particular contractual issues, such as the price, and the time frame, for when the contract arises.
The use of an MSA is also possible when there is a long-term agreement, wherein two parties might want to avoid negotiating rates every time a new ogre is generated. Companies need not halt and slow their progress to negotiate new terms and can quickly move forward to complete the job, thus saving both time and money for both parties.
What Should the MSA Cover?
When you build an MSA, you must focus on including the following four things in the agreement:
- Responsibility for every issue that either party might face
- The tasks that the companies will perform together
- The actions the other company must take
- The actions that your company will take
Discussions on potential issues in advance are crucial. Even a simple thing, such as a third-party vendor going bankrupt, could derail an MSA. Both parties must plan for such potential pitfalls in the agreement.
An MSA should contain the following conditions:
- Background checks: Any demands for the prospective hires who want to work on the project must be listed in the MSA.
- Expected costs: The parties must mention the estimated costs of participating in the product’s development.
- Delivery and installation: The MSA must mention the party responsible for the initial setup after the product’s shipping.
- Payment Mode: One party has to inform the other regarding payment details, such as when to pay, how often to pay and for how long the payments have to continue.
- Insurance: The insurance expenses and coverage shall be handled per the parties’ agreement. If there is any setback in the MSA and the parties fail to fulfil the insurance terms, the result could be as disastrous as reaching the point of litigation.
- Security: Both parties shall have to agree on security terms such as who shall safeguard their product or project and who shall pay for the same.
- Escrow: The companies shall decide whether one of them will put money in a trust and, if so, what the conditions under which the other will be able to earn it.
- Project management: It is essential to establish who is in charge. If a decision of who is in charge is not made, things could go wrong.
- Tax responsibilities and liabilities: The MSA must specify which company shall bear the risk in the event of an incident. If not, they might face a dispute over who is to blame. Both parties must decide how they shall split the tax expenses on the determination of the taxes.
- Legal venue: The MSA must mention which court’s jurisdiction shall cover the dispute resolution procedure if both parties arrive at some disagreements.
- Clauses for termination of the contract: Break up of businesses occur regularly. The MSA must outline how both parties should proceed if there occurs an event of corporate divorce occurs.
The Advantages of an MSA
- A business-to-business contract’s completion takes a significant amount of time and money.
- Legal representation costs and the time put in must be paid for by a business. Everyone will be happier if the transaction goes more quickly. A Master Service Agreement’s essential tenets are agreed upon by both parties. A transaction is completed more quickly because of this.
- A Master Service Agreement document can be made by a business in a matter of weeks or even days. That is significantly quicker than traditional contract negotiation.
Vakilsearch, which is now transitioning into Zolvit, has business experts that help you draft an MSA with all the necessary terms while allowing parties to make additional changes and adjustments. To draft your MSA online with Zolvit, click here now!
Bottomline
An MSA creates a negotiating process template and point of reference that effectively removes the need to create a new service agreement for every action the parties take. The MSA negotiations allow the company to experience concerns or issues that may arise later. This benefits the company, as they will know what problems they may have to face in the future and accordingly address the issues when they draft any MSAs in the future. An MSA can be useful for both parties by being time- and cost-effective.
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