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What Is a Master Services Agreement?
A master services agreement, or MSA, is a contract that two parties enter into during a service transaction. The agreement explains the expectations for both parties. A master services agreement is a broad contract that allows the parties involved to understand:
- Major points of the deal
- Expectations
- How conflicts and other issues should be handled
What Are the Goals of a Master Services Agreement?
The MSA simplifies the negotiation process when drafting new contracts between the parties, allowing everyone to proceed with an overall understanding of how they should work together. It should state what each party must do to honor their side of the agreement. The overall goal of a master services agreement is to make the contract process faster and simplify future contract processes.
What Should a Master Services Agreement Include?
When you are drafting an MSA, you will want to focus on a few main points:
- What will your company do?
- What will the other company do?
- What will both parties do together?
- What are the responsible issues either party might face?
By listing these details, you will help both parties honor their side of the agreement. It is essential to decide potential issues in advance as there are many possible problems that could arise. For example, a third-party vendor could go bankrupt and derail your agreement. That's why it is so important that both companies in the MSA account for any potential pitfalls.
The MSA should include several key components depending on the details of your project, including:
-
Background checks:
If you have any requirements for employees, the MSA should list this.
- Confidentiality: The parties to the agreement can agree they will not share any company secrets with outside parties. Here is an article about confidentiality agreements between businesses.
- Delivery/installation: State when a product will ship and who will be responsible for setting up the first shipment.
- Dispute resolution: A master services agreement should outline how the parties will resolve a conflict should issues arise.
- Escrow: If either party is placing money in a trust, you should use the MSA to explain the circumstances that will allow the other party to earn that money. Here is an article about escrow.
- Geographic location and government requirement: Parties should agree upon where employees will do the job. Deciding where to work on a project has implications for city, state, and federal taxes.
-
Insurance:
Agree ahead of time on how you will handle insurance expenses and coverage.
- Intellectual property: The MSA can cover intellectual property rights. The parties can decide how they will handle regulation and ownership of things such as patents and other intellectual property. In some cases, the client will get all intellectual property, while in other cases, the vendor provides perpetual rights but keeps their own intellectual property and patents. Here is an article about intellectual property.
- Liability: This contract should list which party is responsible in the event of a lawsuit should an incident occur. The master services agreement should state the party that will assume the risk.
- Out clauses/causes for termination of the agreement: Businesses do split up, so the MSA should detail how the parties would handle this.
-
Project management:
State who is in charge. Your project could easily go wrong if neither side decides who should be managing different aspects of the project.
- Requirements for delivery: Detail who will deliver what and when these deliverables are due.
- Security: Parties should agree on who will handle and pay for security to protect the product or project.
- Standards for work: Define what each party considers acceptable work. When one party does not live up to work standards, it creates a common source of conflict, so clear expectations included in the MSA can help avoid future disputes.
- Tax responsibilities: The business must decide how they will divide tax expenses and responsibilities.
- Terms of payment: The MSA should state the estimated cost of a project along with the payment schedule. Include the projected cost as well as who is paying, when they will pay, how often they will pay, and how long payments will continue.
- Third parties: If your project requires the involvement of more than the two parties that are creating the MSA, you should state in the MSA how the rest of the agreement applies to any third party.
- Venue of law: A master services agreement should identify the location where a legal resolution will occur, for example, arbitration, a specific state, or federal court.
- Warranties: Parties can use the MSA to agree upon scope and coverage of warranty.
Depending on your project, you can also use a master services agreement to cover some other areas, including:
- Business ethics
- Property and network access
- Social responsibilities
Again, the goal of your MSA is to broadly explain as many details as possible. That helps your business to avoid wasting money and time in negotiations.
See Master Services Agreement Pricing by State
- Alabama
- Alaska
- Arizona
- Arkansas
- California
- Colorado
- Connecticut
- Delaware
- District of Columbia
- Florida
- Georgia
- Hawaii
- Idaho
- Illinois
- Indiana
- Iowa
- Kansas
- Kentucky
- Louisiana
- Maine
- Maryland
- Massachusetts
- Michigan
- Minnesota
- Mississippi
- Missouri
- Montana
- Nebraska
- Nevada
- New Hampshire
- New Jersey
- New Mexico
- New York
- North Carolina
- North Dakota
- Ohio
- Oklahoma
- Oregon
- Pennsylvania
- Rhode Island
- South Carolina
- South Dakota
- Tennessee
- Texas
- Utah
- Vermont
- Virginia
- Washington
- West Virginia
- Wisconsin
- Wyoming
Advantages of Creating a Master Services Agreement
A master services agreement offers a few key advantages:
- Faster process than standard contract negotiations: When businesses spend time creating a contract, it is often a lengthy and expensive process. Coming to a quicker deal is in both parties' best interests. A master services agreement allows you to agree to the main points, thus speeding up the process of negotiating. It's possible to write a thorough master services agreement in a few weeks or even days, which is significantly faster than most contract negotiations.
- Protection for both parties: Even though you are not going through a typical contract negotiation, the MSA still puts an agreement in place. If a dispute happens, the agreement will decide who is at fault. It's easy to check a master services agreement, which makes the two parties less likely to take a dispute to court, again saving money and time.
- Blueprint for future agreement: If you like the master services agreement you create, it is very easy to use as a template for negotiations in the future. Of course, each deal necessitates its own specifics, but you will have a blueprint that allows both parties to focus on important details of the discussion.
Image via Unsplash by cytonn_photography
Common Master Services Agreement Disputes
You MSA will lessen legal concerns during your negotiations, but issues can still occur between the parties. The most common disputes that happen when companies use MSAs include:
- Failure to communicate: If one business requests updates but the other company does not respond in a timely manner, it can lead to disputes.
- Injury or death of an employee: Unless this is clearly addressed in your MSA, parties are likely to debate who holds the blame for these kinds of incidents.
- Missed deadlines: If one party misses deadlines, it will lead to disagreements between the parties.
- Missed payments: This is one of the fastest ways to create conflict between parties.
- Performance/service issues: If a product or service does not meet expected goals, conflict will likely arise.
- Property damage: You will want to clearly address what happens in the case of property damages, as this is a common source of dispute between partner companies.
The more you plan for these potential conflicts in your master services agreement, the less likely conflicts will come up down the line.
That's why it's so important to work with an experienced lawyer when creating a master services agreement. A contract lawyer can help ensure your document covers all the necessary clauses and details.
Meet some of our Master Services Agreement Lawyers
Agnes M.
Agnes Mombrun Geter is the Founder and Managing Attorney of Mombrun Law, PLLC. She is an experienced attorney and is a member of the Florida Bar, New Jersey Bar, and the Pennsylvania Bar. The firm's practice focuses on Estate Planning, Business Law, and Debt Settlement including IRS Debt Relief. The firm's goal is to simplify the law and provide clients with the confidence and information necessary to make their decisions. The firm also provides project-based legal services to other attorneys and law firms, along with assisting as personal counsel and local counsel on legal matters.
Richard P.
Have over 40+ years of corporate and commercial law experience.
Julian H.
I am a business attorney with years of experience advising individual entrepreneurs and small businesses on issues ranging from entity selection/formation to employment law compliance, to intellectual property protection and exploitation. I often act as General Counsel for my clients fulfilling the legal function as part of a team of managers. I look forward to learning more about your business and how I may be of assistance.
Christopher R.
Corporate and transactional attorney in sixth year of practice. Focus areas include general corporate counsel, labor and employment law, business partnership matters, securities matters related to privately-held companies, and regulatory compliance in securities and finance matters.
Forest H.
Forest is a general practice lawyer. He provides legal advice regarding small business law, contracts, estates and trusts, administrative law, corporate governance and compliance. Forest practiced complex commercial litigation in Florida for eight years, representing clients such as Host Marriott, Kellogg School of Business, and Toyota. Since moving to Nashville in 2005, he has provided legal advice to clients forming new businesses, planning for the future, and seeking funding through the use of equity and/or debt in their businesses. This advice has included the selection of business type, assistance in drafting and editing their business plans and offering material, reviewing proposed term sheets, and conducting due diligence. Forest is a member of the Florida, Tennessee, and Texas Bars; in addition. Forest has held a Series 7, General Securities Representative Exam, Series 24, General Securities Principal, and Series 63, Uniform Securities Agent State Law.
Anjali S.
CA, NY, and FL licensed attorney with nearly a decade of experience in intellectual property, data privacy, commercial contracts, and employment. I also have both the CIPP/US and CIPP/E privacy credentials. Basically, everything your business needs!
July 13, 2020
Dillon N.
I joined Enterprise Law Group, LLP as an Associate in March 2020. My practice has involved a wide range of legal matters from commercial real estate, finance and international business transactions to litigation matters including commercial disputes, personal injury and medical malpractice. Proficient in Spanish, I graduated from the University of Kentucky College of Law, the Patterson School of Diplomacy and International Commerce, and the University of Southern California. Prior to my legal career, I sought diverse professional experiences. After graduating from college, I orchestrated my own volunteering experience in southern Peru with a small non-profit organization. Later I gained valuable professional experience as part of a U.S. Senate campaign, and after that I joined the public policy team at Greater Louisville, Inc., Louisville's Chamber of Commerce affiliate. Prior to law school, I embarked on a month long excursion with the Northern Outdoor Leadership School in Alaska, which gave me a new found appreciation for sustainability.