The rights to intellectual property are covered under master service agreement. The parties may determine how to regulate and manage patents and other intellectual property matters.
Clauses of Master Service Agreement
Payment
In this clause, the client and the service provider agree upon the payment deadline date, and if it exceeds, then the interest is to be charged accordingly. The customer can also impose conditions on payment, for instance, payment to be done upon receiving deliverables.
Intellectual Property Ownership
The parties to the contract decide the ownership and regulation of patents and other IPs. The customer will get all the IPs in some instances; in others, the service provider provides perpetual rights while keeping their IP and patents.
Allocation of Risk
Representations and Warranties
If a party makes an impression to the other party regarding a fact that in future turns out to be incorrect, then the guilty party (indemnifier) is supposed to indemnify the indemnified party.
Indemnification
This clause helps the indemnified (one who gets safeguard from all the losses in the suit) to claim all the expenses he has incurred because of the other party to the contract, i.e., the service provider.
Disclaimer of Warranty
The MSA has a special feature to add up its warranty and can disclaim any other warranty of other statutes. But if any clause of the contract expressly says a warranty, then you cannot give a disclaimer for that.
Limitation of Liability
By default, the party breaching the contract is liable for all the expenses, whether direct or indirect expenses. When the party imposes the limitation of liability clause on the contract, he confines his scope of indemnification. He can do so by setting limitations on indirect expenses and bearing only direct expenses or vice-versa.
Insurance
Customers will always want the service provider to have a standard amount of insurance so that customers can have faith and be assured of any unforeseen losses. It also increases the credibility of the service provider.
Acceptance
The master service agreement must contain a process for customer acceptance and their review of it.
Deadlines and Delivery
The master service agreement should always have a delivery and deadline clause for those deliverables that are critical or urgent.
Intellectual property
Confidential Information
Since both parties can provide confidential information and that is something which is to be done mutually. So, if just one of the parties is providing confidential information, then it is known as unilateral confidentiality. Confidentiality provisions should define the appropriate degree of care to be used in keeping the information secret.
Non-solicit of Employees
This clause imposes a limit on the customer’s capacity to hire away employees from the service provider itself so that the customer can save money and can also maintain its confidentiality. To prevent this, service providers consider incorporating this clause in their master service agreement, which can restrict the solicitation of employees during the course of normal business.
Open-Source
The customer must be aware of what open-source technologies are being used. If he wants to build his sole technology, they must require service providers’ representation.
Marketing Rights
Several customers want to keep the relationship with their service providers secret to gain a competitive business advantage. On the other hand, several service providers want to do the advertisement for their big clients. This clause helps the parties mutually agree upon the marketing rights against each other to avoid any future ambiguity.
Boilerplate
Subcontractors
The service providers are allowed to sub-contract the original contract. Still, suppose the information being provided by the customer is delicate. In that case, it may be prohibited by the customer, and the service provider then has to use its employees for that particular task.
Independent Contractor
It refers to a person or an entity that delivers its goods or services not regularly, unlike employees, under a contract.
Assignment
When the service providers do not finish off work allotted to them on time, then the customer may hire a new provider for the same contract, known as assignment.
Dispute Resolution
The MSA must include guidelines for settling disputes when arising. It can add several guidelines such as the location of the settlement of disputes, escalation of dispute resolution if any, arbitration process- as it is quicker and cheaper, jury waiver and attorney fees.
Act of God
The parties to the contract can expressly agree that no remedies will be available if there is a breach of contract caused by circumstances or factors beyond the control of parties to the contract, like natural disasters.
Termination
- The master service agreement can be terminated in two cases; the first is termination for a cause, and the second is termination without cause.
- Termination for a cause
- This generally happens when there is a breach of contract by either of the party or by both.
- Termination without cause
- This clause allows the parties to terminate the contract upon communicating prior written notice subject to the indemnification clause if any related.
How to Draft the Master Service Agreement (MSA)
While drafting the MSA, the following points should be kept in mind:
- Jolt down all the work that both parties will do together.
- All the responsibilities and duties that each party is required to perform.
- All the issues that either of the party may encounter.
- All the work that each of the parties will perform individually.
Importance of Master Service Agreement
In the present dynamic and hostile business environment. Every business must be proactive and adapt to the changing environment; the same works for the technology business.
- The master service agreement assist businesses in diminishing the risk of litigation and avoiding contractual disputes.
- The master service agreement speed up the negotiation process. Therefore, parties can focus more on important aspects of the contract.
- In the case of the MSA, the party which is solely held responsible for any mistakes will have to indemnify the other party for all the losses that arose due to the fault of the guilty party.
- The master service agreement also reduce the redundancy of the same terms again and again between the same parties to the contract.
- The master service agreement also act as a framework for all future transactions between the parties to the contract.
Also, Read:
