What is a Master Service Agreement?
A master service agreement (MSA) – also referred to as a framework agreement – is a contract that outlines expectations for an ongoing business relationship. They are used between companies that agree to work together long-term, and outline terms and conditions for everyone involved. MSAs are detailed and invaluable when it comes to forming continuing partnerships.
Why are Master Service Agreements Important?
Putting together and negotiating MSAs may be time-consuming, but they inevitably make business partnerships easier in the long run. If you know you’re going to work with a client for an extended period of time, it’s easier to outline a contract for ongoing use rather than a one-time transaction.
If you have an MSA it speeds up future decisions, negotiations, and any amendments required to continue working together. It sets the groundwork and lays out expectations for everyone involved. An MSA acts as a fallback to answer questions and help settle disputes, and ultimately keep all parties happy and accountable.
Who Should Use a Master Service Agreement?
If you’re establishing a new ongoing business relationship, you should consider creating an MSA. Many tech companies, especially sales teams, have started using them to help outline expectations for collaborations.
Any situation where you expect to work with another company for an extended period of time should have a contract put in place with a continuous agreement. Since they are becoming more commonplace, proposing an MSA shouldn’t raise any red flags. In fact, people should want to negotiate one, as it will make the entire process smoother.
Terms to Include in a Master Service Agreement
MSAs are detailed and take time to negotiate. Both company’s legal teams will be involved, and there’s a lot of back and forth. While it seems strenuous, you can rest easy knowing that any future roadblocks or questions will be easily addressed by referring to the terms and conditions originally agreed upon.
- Responsibilities and project management. Outline everything each team (and company) is responsible for. It should be easy to see who is ultimately responsible for what.
- Confidentiality. The work being done should always be kept confidential. Company A should never share information about company B that they obtained through an ongoing partnership. Always include a confidentiality clause.
- Deadlines. When does work need to be completed? Make sure everyone is held accountable to specific deadlines, as outlined.
- Payment terms. Everyone wants to be paid on time, so include a clause for payment information as well. It’s common for finance teams to be consulted for this information.
- Liability. If something goes wrong, whos responsible? Liability should always be defined for the scope of your project, as well as for items such as insurance, warranties, trademarks, etc.
- Scope of work. What exactly is being done within your partnership? Are you collaborating with another company for a single project over an extended period of time, or do you have multiple smaller projects on the go simultaneously? Ensure the scope of your work is clearly outlined.
- Termination. MSAs should always include a termination clause that outlines how the partnership can be ended, in mutual terms agreed upon by both parties.
These are only some of the elements to include. Every MSA will look different depending on the specific partnership, and what type of work is being done.