Master Service Agreement: Purpose and Main Elements

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What is a Master Service Agreement?

A master service agreement, also called framework services agreement, is a contract between two parties: a service provider, such as an IT consulting firm, and a receiver of that service. It outlines the terms of future engagements and work and details the obligations of both parties.

An MSA agreement sets the foundation for a long-term business relationship. It is flexible and ongoing. A master service agreement details basic tenets that govern the relationship between the service provider and the service receiver and allows for negotiation in future decisions.

What is the Purpose of a Master Service Agreement?

Generally, a master service agreement spells out most of the terms and conditions between the two parties. This simplifies the negotiation process during the finalization of future contracts.

The agreement consists of elements such as:

• Conflict resolution processes
• Delivery requirements
• Intellectual property rights
• Payment terms
• Warranties

The essential goal of the service contract is to set a tone for the ongoing project.

A master service agreement is specially signed in business transactions where the statement delivers work services.

Here is an article about contracts and their common elements.

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Three Main Elements in a Master Service Agreement

When detailing a master service agreement, it is vital to consider three main elements.

1. Responsibilities and obligations : You should discuss the responsibilities and obligations of each party. Listing these factors will bring about points that both parties could negotiate. Since this is a long-term contract, make sure you negotiate and bag the best deal.
2. Decide what potential issues or disputes could arise : Plan any possible pitfalls.
3. Keep the agreement flexible : You will have space to work it out in case of any mishap.

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What Should Be Included in a Master Service Agreement?

A master service agreement will include different components depending on the nature of your project, including:

• Background checks : The contract should include any requirements or prerequisites you have for the employees.
• Conflict resolution : The agreement must state how disputes will be resolved.
• Escrow : If you are investing in a company, the contract should mention if the other party will share the profit or not.
• Insurance : Discuss beforehand how will the insurance expenses be handled.
• Security : Detail the security costs. Who will manage and pay for the security, etc.?
• Standards for work : State clear expectations in the master agreement. Explain each party's responsibilities. This will help avoid any conflicts or misunderstandings in the future.
• Termination : This must be included to decide which party will pay for breaching the contract. Termination for convenience is when a party wants to break the agreement without any reason. Termination for cause is when a party is not performing its obligations.
• Term : This will state the period of time for the contract. You can discuss whether you are looking for a long-term statement of work or not. This will also mention renewal terms and processes.
• Intellectual property : Both parties will have to decide on the ownership and regulation of things. It is possible that the vendor gets the intellectual property and gives rights to the client. In some cases, the client keeps all of the intellectual property.
• Confidentiality : Both parties can agree that they will not disclose any information to a third party.
• Delivery and installation: State the shipping date of a product—also, state who will be responsible for receiving and setting up the shipment.
• Liability : The agreement will clearly state who is responsible in case of a lawsuit. In an ideal case, the client should cover the risk.
• Third parties : For any third party involved, include the terms and conditions in the contract separately.
• Project management : It is necessary to decide who will be leading the team and the project. Without an efficient leader, your project could be all over the place. So state clearly who is in charge.
• Venue of law : Identify the location where any legal matters will be resolved.
• Terms of payment : The project's estimated cost should be included in the master service agreement. Remember to give a detailed breakdown of these expenses and the payments. For example, how long will the payments continue, who will pay, and how often do you have to pay?
• Outclauses : These are the causes for termination of the contract. The MSA should list how the parties will handle such an unfortunate event. This is important to ensure the business runs smoothly.
• Warranties : You can also decide on the coverage and range of the warranty.

Some other points that you can consider covering in your master service agreement could include:

• Business ethics
• Social responsibilities
• Property and network access

Types of Master Service Agreements

A master service agreement can cover a variety of topics. Topics that may be covered include:

• The ownership rights of a property
• Royalties or patents associated with innovations
• confidentiality agreements
• Compensation in case of a suit by a third-party
• Conflict resolution
• Work schedules

What is the Difference Between a Master Service Agreement and a Service Level Agreement?

A Master Service Agreement is often confused with a Service Level Agreement. However, these are two distinct types of agreements.

A Master Service Agreement (or MSA) is an agreement between two parties that list the terms and conditions that will govern their future business relationship. It sets out the basic outline as proposed by each party.

This makes it easier to negotiate any clause. This type of services agreement includes payment terms, product warranties, intellectual property ownership, etc. The master service agreement should create a flexible system to be modified in the future.

On the other hand, a Service Level Agreement (or SLA) is between the service user and the service provider only. The SLA does not outline any requirements for the provision of the service. It also does not have any expectations from the user.

An example of an SLA would be the agreement between the internet service providers and the telephone company.

Here is an article about service level agreements.

Master Service Agreement Checklist

If you wish to draft a master service agreement, here is a checklist for you:

1. Definitions : The first step is to define the terms clearly. This would make the contract easier to understand.
2. Avoid Ambiguity: Do not use a synonym for the defined term to avoid ambiguity.
3. Proprietary Rights : This will list the rights provided to the customer.
4. Responsibilities : These are the obligations each party has to fulfill. This could include the tasks of each party and the time they should complete them.
5. Representations and warranties : This section will list the duration and limitations of the warranty. It can also state that the other party will not be responsible for certain issues.
6. Fees : This will outline how much you will have to pay for the services. It will also list details such as when the invoice will be sent and what time frame you have to make the payments. It can also mention the taxes that are not included in the fees.
7. Indemnification : If a party suffers any loss from a third party, the other party will compensate for the losses.
8. Confidentiality : You will first have to agree on what is confidential. It will also include the clause stating that confidential data cannot be disclosed.
9. Terms and termination. This will list out any clauses on termination or suspension.

Get Help with a Master Service Agreement

A master service agreement can simplify things for you. For example, now that you know what is required for the master service agreement, you can devise one with your legal team. Or hire lawyers to draft or review your consulting agreement from a legal marketplace.

Post a project in ContractsCounsel’s marketplace to receive flat fee bids from lawyers for your project. All lawyers have been vetted by our team and peer-reviewed by our customers for you to explore before hiring.

ContractsCounsel is not a law firm, and this post should not be considered and does not contain legal advice. To ensure the information and advice in this post are correct, sufficient, and appropriate for your situation, please consult a licensed attorney. Also, using or accessing ContractsCounsel's site does not create an attorney-client relationship between you and ContractsCounsel.

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Ryenne S.

Ryenne S.

My name is Ryenne Shaw and I help business owners build businesses that operate as assets instead of liabilities, increase in value over time and build wealth. My areas of expertise include corporate formation and business structure, contract law, employment/labor law, business risk and compliance and intellectual property. I also serve as outside general counsel to several businesses across various industries nationally. I spent most of my early legal career assisting C.E.O.s, General Counsel, and in-house legal counsel of both large and smaller corporations in minimizing liability, protecting business assets and maximizing profits. While working with many of these entities, I realized that smaller entities are often underserved. I saw that smaller business owners weren’t receiving the same level of legal support larger corporations relied upon to grow and sustain. I knew this was a major contributor to the ceiling that most small businesses hit before they’ve even scratched the surface of their potential. And I knew at that moment that all of this lack of knowledge and support was creating a huge wealth gap. After over ten years of legal experience, I started my law firm to provide the legal support small to mid-sized business owners and entrepreneurs need to grow and protect their brands, businesses, and assets. I have a passion for helping small to mid-sized businesses and startups grow into wealth-building assets by leveraging the same legal strategies large corporations have used for years to create real wealth. I enjoy connecting with my clients, learning about their visions and identifying ways to protect and maximize the reach, value and impact of their businesses. I am a strong legal writer with extensive litigation experience, including both federal and state (and administratively), which brings another element to every contract I prepare and the overall counsel and value I provide. Some of my recent projects include: - Negotiating & Drafting Commercial Lease Agreements - Drafting Trademark Licensing Agreements - Drafting Ambassador and Influencer Agreements - Drafting Collaboration Agreements - Drafting Service Agreements for service-providers, coaches and consultants - Drafting Master Service Agreements and SOWs - Drafting Terms of Service and Privacy Policies - Preparing policies and procedures for businesses in highly regulated industries - Drafting Employee Handbooks, Standard Operations and Procedures (SOPs) manuals, employment agreements - Creating Employer-employee infrastructure to ensure business compliance with employment and labor laws - Drafting Independent Contractor Agreements and Non-Disclosure/Non-Competition/Non-Solicitation Agreements - Conducting Federal Trademark Searches and filing trademark applications - Preparing Trademark Opinion Letters after conducting appropriate legal research - Drafting Letters of Opinion for Small Business Loans - Drafting and Responding to Cease and Desist Letters I service clients throughout the United States across a broad range of industries.