Master Services Agreements: Understanding the Key Provisions

If your business provides services to clients or hires service providers on an ongoing basis, a Master Services Agreement (“MSA”) can be a valuable tool for managing your business relationships.  An MSA serves as a framework agreement that outlines the general terms and conditions of an ongoing relationship between the parties while reserving specific details of each project or transaction in a Statement of Work (“SOW”) or a separate work order.

In this article, we will outline 7 key provisions that should be included in an MSA to ensure a successful and mutually beneficial business relationship.

1.     Scope of Services: The scope of services provision outlines the general description of the services that the service provider will provide.  The specific details of the services for each transaction will be provided in an SOW.  This provision is crucial for setting clear expectations and avoiding misunderstandings about the services provided.

2.     Payment Terms: The payment terms provision specifies the payment schedule and conditions.  This provision should specify how payment will be made, whether it will be made in installments or as a lump sum, and when payment is due.  Additionally, it should specify any late payment penalties or interest charges, as well as any conditions under which payment may be withheld.  Clear payment terms ensure that both parties understand the financial obligations and avoid disputes regarding payments.

3.     Term and Termination: The term and termination provision specifies the duration of the agreement, as well as the conditions for termination.  This provision should specify the circumstances under which either party may terminate the agreement and the notice period required.  It is important to consider the potential risks and costs associated with early termination, and to ensure that the termination provision is fair and reasonable for both parties.

4.     Intellectual Property: The intellectual property provision addresses ownership and use of intellectual property.  This provision should specify who will own any intellectual property that is created or used in connection with the services provided, as well as any limitations on the use of that intellectual property.  It is important to ensure that the intellectual property provisions are clear and unambiguous, as disputes over ownership and use of intellectual property can be costly and time consuming.

5.     Confidentiality: The confidentiality provision is essential to protect the confidentiality of any sensitive or proprietary information that is shared between the parties.  This provision should specify what types of information are considered confidential, how that information will be protected, and the consequences of a breach of confidentiality.  It is important to ensure that the confidentiality provisions are strong enough to provide adequate protection, but not so strict as to unduly restrict the parties’ ability to conduct business.

6.     Indemnification: The indemnification provision addresses the allocation of risk between the parties.  This provision should specify who will be responsible for any damages or liabilities that arise in connection with the services provided, and how those damages or liabilities will be allocated between the parties.  It is important to ensure that the indemnification provisions are fair and reasonable for both parties, and that they provide adequate protection against potential risks.

7.     Governing Law and Dispute Resolution: The governing law and dispute resolution provision specifies the law that will govern the agreement, as well as the method of dispute resolution.  This provision should specify which jurisdiction’s law will apply to the agreement, as well as whether disputes will be resolved through arbitration, mediation, or litigation.  It is important to ensure that the governing law and dispute resolution provisions are clear and enforceable, and that they provide a fair and reasonable process for resolving disputes between the parties.

By including these key provisions in the MSA, you can ensure that both parties are protected and that the relationship runs smoothly.  An experienced business attorney can help you draft and negotiate an MSA that meets your needs and minimizes legal and financial risks.  If you need help drafting an MSA, contact a Parsus attorney today!

Legal Disclaimer: The information in this article is provided for general informational and educational purposes only.  It is not intended to be legal advice and does not create an attorney-client relationship.