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The Anatomy of a Master Service Agreement

January 15, 2018

Whenever a business decides to partner with a technology provider, it’s important for both parties to outline the terms of the agreement that will provide the guidelines of their work agreement. This includes what each party will do individually, what both parties will do together, and the accountabilities and terms should the agreement not be met. A Master Service Agreement (MSA) covers all of these bases, providing legal protection for both parties in the case that their agreed-upon work doesn’t come to pass. Here is what it should include, section by section.

Start with a Short Preamble

Introductory text for an MSA, like most contracts, is pretty boilerplate. Make sure the date of the contract signature, both organization’s official names, and the kinds of services they provide, are accurately written in the preamble.

Outline the Contracted Services and Terms of Agreement

The second part of the MSA, called the Agreement, is expansive. It should begin with a paragraph-long explanation of service deliverable, which is typically referred to as the Contracted Services. This explanation broadly defines the services that are being provided, and makes note that the project should be confined to those services unless contractually amended.

The Terms of Agreement expounds on this broad definition and cites the project’s overall scope, including the start date, project timeline, and termination conditions.

Explicitly State Payment Terms and Associated Fees

Every contract is fundamentally a promise of one party to make payment to another in exchange for services rendered. Therefore, the statement of payment terms, which discusses exactly how much one party must pay the other, is incredibly important.

Once your MSA has outlined the services being commissioned, it should state the payment terms, amount, and late charges.

A Note About Services Outside of the Project Scope

Changes are inevitable. However, changes need to be agreed upon and included in contractual amendments. A non-sequitur paragraph can quickly note that any services done outside of the project scope should be approved by both parties and offer terms of compensation for those services.

Include Non-Disclosure and Non-Solicitation Agreements

Confidentiality is critical. It protects both parties and their clients. A non-disclosure agreement expresses the kinds of materials and communications both parties should not discuss and for how long.

Companies typically want to keep their clients close to the vest. It’s imprudent and unprofessional for a new partner to attempt glean information about those clients and solicit them, particularly during the timeframe when two partners are collaborating. A non-solicitation agreement prevents this from occurring, usually for 12 or 24 months after the project ends.

The Most Important Parts: Limitations of Liability and Indemnification

No one wants to get sued. A limitations of liability clause explicitly outlines what each partner is liable for and what they are not liable for in the event of financial loss and damages. Therefore, it mitigates the circumstances in which one party can take legal action against the other as well as circumstances in which a third-party can take legal action against both parties.

But what about if one of the partners makes an error and a third-party attempts to sue the second partner? The latter party would be protected by another clause, Indemnification. This clause discusses which party accepts financial responsibility and often includes wording that states neither party can sue the other.

In summary, partnering with a technology company can provide you with services you don’t have internally, or within timeframes you can’t meet with your existing team. Make sure your partnership is sealed with a Master Service Agreement to set the expectations of this partnership off on the right foot.