Businesses and organizations often rely on their partners and other outside parties to further their goals. Having a clear guide and set of expectations to shape these relationships is important for all involved. That’s where a master service agreement can help out – these documents are designed to outline the essential details that each party is expected to know and follow. Here’s everything you need to know about master service agreements and how to implement them into your workflow.
What is a Master Service Agreement (MSA)?
A master service agreement is a contract that establishes fundamental terms and expectations between two parties at the beginning of their business relationship.
Think of an MSA as a roadmap that outlines a business partnership’s scope and conditions. It essentially puts all of the vital information each party needs to know and agree on into a formal piece of writing.
Having a master service agreement not only simplifies the negotiation process but also helps collaborating businesses or teams speed up future contractual agreements. Everyone involved in the MSA gets to save time and money by laying a strong foundation before the work actually begins.
Why is an MSA important?
MSAs are crucial for a few reasons. For one thing, they’re convenient. By clarifying expectations and creating systems to manage disputes or disagreements, MSAs help all parties cut down on the time they need to spend negotiating now and in the future.
Likewise, master service agreements provide risk protection. Crafting an MSA agreement at the beginning of a business relationship allows both parties to establish clear expectations that can be referenced should a disagreement or dispute occur.
The longer a business relationship lasts (and the more diverse the work it discusses), the more critical a master service agreement becomes. As work naturally changes and grows, parties can return to their signed MSA to add to or amend it instead of building a new agreement from the ground up.
For instance, if both parties want to expand their partnership to start a new project, they can turn to their existing MSA as a foundation when creating an updated agreement. This ensures parties reach settlements faster and keep their business activities moving forward.
What Does an MSA Include?
While master service agreement contents will vary depending on the industry, the nature of the work, and the parties involved, most include fundamental details like those below.
To view more sections and details that might be included, check out these master service agreement examples from the Securities and Exchange Commission (SEC):
Scope of Work
As perhaps the most crucial piece of an MSA, the scope of work section outlines specific services or projects that are covered under the agreement. Its contents might also describe project goals or objectives, deliverables, and deadlines, among other things.
Payment Terms
Most master service agreements clearly outline a project or partnership’s payment expectations, including schedules, rates, late payment penalties, and information about the invoicing process. Anything parties need to know to ensure everyone is satisfied with how and when they get paid goes here.
Delivery Requirements
MSAs that cover projects or deliverables usually also include timelines and specific product delivery requirements. These spell out what happens if deadlines aren’t met, if products don’t meet expectations, and what milestones must be considered.
Confidentiality
Many MSAs take care to specify what kind of information each party considers confidential. They might also discuss how confidential information can be used, if at all, and what obligations each party has to protect it.
Intellectual Property Rights
In some cases, MSAs cover projects, products, or work that results in new designs, writing, etc. When this is true, a discussion about who owns these intellectual properties (and under what circumstances) is crucial.
Indemnification
This section breaks down the responsibilities each party has to compensate the other should any harm, loss, or liability arise out of the agreement.
Do I Need a Master Service Agreement?
If you plan to enter a new business relationship with another party, want to formalize your existing relations, or need to clarify what’s expected of you or your partners, a master service agreement is a good first step.
Since MSAs partially exist to help you save time down the road, it makes sense to establish one sooner rather than later. It’s natural for relationships to ebb and flow, but an MSA helps you ensure that you’re equipped to adapt to these changes without the headache of repeated lengthy negotiations.
Create, Refine & Sign MSAs with CDP
Whether you’re creating an MSA from scratch or adding to an existing document, CDP can make your life easier. CDP’s software solutions help you draft, share, and sign contracts and other documents from an easy-to-use digital platform.
Grow your organization or business' reach with just a few clicks with the help of CDP. To get started, sign up for a CDP demo today.
