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What is an MSA Agreement?
A Master Service Agreement (MSA) is a legal contract that defines the basic terms and conditions that will govern future transactions or agreements between a service provider and another entity. MSA agreements are helpful to parties to the contract, including clients, because they make it easy to do business together by providing a clear pathway and structure to create new agreements.
In this article, we will go over why an MSA agreement is important, what it should include, and how it is different from a statement of work. Then, we’ll offer some helpful advice that you can you if you still need help.
Why Use an MSA Agreement?
Master Service Agreements (MSAs) are legally binding agreements between two or more parties that lay the groundwork for future agreements or transactions. When companies have ongoing relationships with clients or other entities, MSAs make it easier to enter contracts and can also speed up contract negotiations.
Here are some of the benefits master services agreements offer:
- Makes the contract process straightforward
- Sets a foundation for expectations of all parties
- Allows companies to plan for the future
- Gives parties more time to respond to contract proposals since the basic details are already in place
- Saves time and money
- Allows for more flexibility in long-term business relationships
- Gives specific instructions on what to do in the event of a missed deadline, property damage, missed payment, and more.
Check out this article to learn more about why MSA agreements are useful.
What Should an MSA Agreement Include?
When you create a Master Service Agreement (MSA), several major areas must be addressed. Ensuring that your agreement is as complete as possible will help streamline business processes, maintain healthy relationships between all parties to the agreement, and set a solid foundation for an ongoing partnership.
Here are the top areas that must be covered in any successful MSA:
Management of Products and Projects
Master service agreements should state who is responsible for delivering and receiving products, who will take care of them, and how they will be handled. Project management information determines who will make sure any project stays on track to meet deadlines and what steps can be taken if anything goes awry.
An essential part of any project is what makes the world go round: money. An MSA should clearly state when payments are due, how they will be taken, and what happens if a late payment occurs. This portion of the contract should also state who is responsible for keeping track of payments.
Insurance is a vital part of project protection and cannot be overlooked. Remember to include details about who provides insurance, who pays for it, and what the coverages are in your MSA. Don’t forget to mention what the penalties are if insurance premiums are not paid.
Project and Product Protection
No matter how well you plan, things can go wrong. Having a process set up for backup funding and escrow is a great way to protect all parties to the contract. Make sure your agreement has specific details about who is responsible for these.
Scope of Work
Including details about the scope of work such as what work is to be done, who will do it, and how long it will take is a great way to keep everyone informed and on the same page. Placing information about this in the master service agreement clearly defines party responsibilities, which will make the relationship more productive in the long run.
From time to time, you may need the help of a third party, such as an independent contractor , to complete a project. Make sure all the rules and guidelines regarding how this type of individual will be hired, what standards they are held to, and who is responsible for keeping the project in check.
An indemnification clause is a liability clause that serves to shift the potential of liability from one party to another. Make sure it is clear who is liable for things like damages, penalties, and lawsuits.
Noncompete clauses forbid employees or partners in a contract from becoming a competitor for their employer or partner for a certain period after the contract is terminated. It is always a good idea to include this in an MSA to protect your business and operations.
A non-solicitation clause makes it illegal for one company to steal employees or partners from another. Including this in your MSA protects your workforce from being poached by a competitor.
Force Majeure Clause
If a natural or unavoidable event happens that causes damage or would otherwise cause parties to violate one or more terms of a contract, the force majeure clause removes liability from parties. This is essential to protecting businesses when unforeseen circumstances arise that cannot be prevented, like an act of nature such as a hurricane or a tornado.
Dispute Resolution Clause
Dispute resolution clauses provide important details about processes and requirements needed to resolve disputes between parties. They help make it easier to resolve conflicts, paving the way for stronger business relationships.
There are times when the scope of work on a project must be modified. This could be due to requests from a client or other unforeseen circumstances. A change order gives specific instructions and processes to be filed if the scope of work must be modified.
A termination clause tells parties what actions could result in termination, who is responsible for payment and how much, penalties for early termination, and more. Termination clauses are important to ensure that all parties receive fair treatment at the end of their working relationship.
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Master Services Agreement vs. Statement of Work
Although a master service agreement (MSA) and a statement of work might sound the same, there are several key differences that you should be aware of. Luckily, the list of differences is short and easy to understand.
Master Service Agreement
A master service agreement is a comprehensive contract that includes most of the important basic details that govern contracts and is meant to govern ongoing relationships. It includes high-level details about business relationships and serves as an overview for business partners to base their relationships on.
However, an MSA is not as detailed as a statement of work.
Statement of Work
A statement of work is a meticulously detailed contract between parties that are completing a project together. Unlike an MSA, a statement of work only governs the terms of an agreement on a single project at a time. Statement work contracts are supplemental to master service agreements since they provide all the details that an MSA does not.
Who Writes an MSA Agreement?
If you need help with writing an MSA agreement, business lawyers can help. Don’t risk going into a project unprotected with no foundation for a healthy ongoing business relationship. Post a project on ContractsCounsel today to get connected with business lawyers who specialize in master service agreements. All lawyers in the CC network are vetted and peer reviewed for you to explore before hiring.
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