The article describes what is a Master Service Agreement (MSA), what should be included in MSA, and also the usefulness of MSA.
Introduction to MSA Agreement
An MSA agreement is written between two parties. There is a service provider on one hand and a customer on the other hand. This agreement contains certain terms and conditions that are related to all the future service-related transactions between them.
Basically, a Master Service Agreement (MSA) is a legal document to notify the basic terms and conditions which will regulate future transactions between the service provider and another party. MSA agreements define the roles and responsibilities of the parties who are signing the contract, giving them a clear pathway, and helping them to prepare the basic structure of future agreements.
Thus, MSAs make the process of negotiations before signing the contract much quicker and smoother. They assist the companies and their respective customers to take care of major concerns which can potentially jeopardise the contract negotiation.
For example, in the case of multiparty dealings, one partner will make sure that it does not remain accountable for the mistake of other partners. To protect itself from the legal obligation of compensation for the loss caused by others, MSAs are signed. This type of situation is legally termed “indemnification”. MSAs thus protect the parties by redefining their individual risks.
Master Service Agreements are most commonly signed by the government and for commercial works. MSAs are expected to protect the interest of the consumer. For example, MSAs protect the customers who are paying a service company. For such monthly or yearly subscriptions, that company will not only be responsible for the service itself but in case of any service disruptions, it will be responsible for reinstating the service as soon as possible. Thus, the company is also responsible for the maintenance work
Advantages of Master Service Agreement
MSAs have multiple benefits to bring in ease of business while protecting the interests of both parties. It helps businesses to avoid contractual disputes. It reduces the risk of unnecessary litigation. Thereby, it accelerates the whole process of negotiations by acting as a blueprint or a proper template of a successful contract. Here are a few advantages of the MSA –
- MSA simplifies the contract process.
- It prepares the boundaries of the expectations of all the parties involved.
- It allows more time to respond to the actual contract proposals since the basic details are already covered prior to the signing of a contract.
- It allows the party to minimize unnecessary delay and it saves a lot of money and expenditure on manpower resources.
- It prepares the foundation for long-term business relations. MSA thus can help the companies to execute their future plan more efficiently.
- It is a written document with clear instructions for any kind of violation or infringement like missing deadlines, missing payments, property damage, etc.
Components of a Master Service Agreement
A Master Service Agreement (MSA) should follow the proper template. To ensure its efficacy, it need understand the actual business processes and accordingly streamline the business relations. MSAs clearly define the scopes of individual partners. Thus, a thorough and effective MSA can promote healthy working relations between the parties involved.
But to ensure that MSA must fulfil the following requirements:
- MSA must clearly define the delivery responsibility in their service agreements, who and how the delivery will be managed, and in case of any problems who will bear the responsibilities to address the issue and make sure the problems are being taken take off right on time.
Thus, it is one of the primary roles of MSA to define the scope of work and make sure the parties are on the same page through proper information sharing.
- MSA should provide the payment guideline and state the implications of any non-payment or delay. It must also identify the party who will be responsible to track the payment and report any delay or non-payment.
- MSA should cover the clause of insurance protection. Especially for big projects or transactions insurance can be critical. MSA needs to clearly mention who will be responsible for such insurance payments and take note of the exact coverage and also mention the implications of non-payment of insurance premiums.
- MSA also mentions the guidelines for involving any third party to run the actual business process. It must clearly mention the roles and responsibilities of the original parties regarding third-party handling and quality assurance etc.
- MSA includes the indemnification clause to identify the party who will actually be responsible in the case of any damage or penalties or lawsuits. It defines the boundaries of each party and protects their individual interests so that none of them can be held accountable for others’ mistakes.
- MSA is often used to forbid the employees or the partners to become potential competitors at least for a certain period even after the termination of the actual contract. It also makes sure none of the parties can actually hire the employees of its partner. Thus, it helps them to avoid poaching the workforce.
- Dispute resolution clauses of MSA lays out the actual process and mechanism of dispute resolution. This necessarily makes conflict resolution much easier and faster.
- The business world is extremely dynamic. Therefore, to cater to such demand the actual requirements may also change as the situations are changing fast. This as a result will change the scope of work to address the unforeseen circumstances. However, for the actual service provider to cater to such demand, costs will also rise. In such circumstances, MSA protects the interest of the parties by stating the service protocol to manage such change orders.
- A termination clause mentioned in MSA provides the guidelines for terminations, obligations for payment and penalties involved, etc.
Therefore, Master Service Agreement or MSA is instrumental in consolidating the business relations between the service provider and other parties. It lays the basic foundation for the actual contract, making the whole process less cumbersome and much faster.