Creating agreements is a time-consuming process. Businesses spend a lot of time negotiating contractual terms with other parties. As a business, it will surely have some long-term deals involving multiple transactions with its clients/customers. Even if the transactions are with the same client, there is a need to create different contracts for each transaction. In such cases, companies use a document known as master service agreement to reduce the time for creating multiple contracts. But, how can this single contract replace a bunch of other contracts? Let’s find out!

What is a Master service agreement?

Master service agreement or MSA is a fundamental agreement between two parties that outlines the contractual terms for current and future activities and business transactions. MSA uses a basic framework with already agreed terms and conditions for future and current agreements. This makes the negotiation process much faster and easier. 

MSAa are mostly used when companies enter into a long-term or ongoing service relationship. In such cases, it is a complex and time-consuming process to create multiple contracts. Here, having an MSA can save a lot of time. With an MSA, the fundamental contract terms like payment schedules, dispute resolution, confidentiality, etc are stated upfront, which makes it easier to create new contracts. This way, businesses can focus more on the unique aspects of each agreement such as the scope of work, industry standards etc. 

Why is a Master service agreement important?

As we discussed, master service agreements make the complex process of creating contracts much easier. With a well-negotiated MSA, finalizing future contracts with that party will be much quicker. Here are some key points that highlight the benefits of having a well-drafted MSA:

• Increased efficiency: Having an MSA will drastically reduce the time required for negotiation. Businesses can quickly move from project discussion to execution. 
• Legal protection: MSA is a legally valid document that guarantees legal protection in case of any disputes. 
• Reduced cost and time: As all the foundational terms are already listed in the MSA, creating new contracts requires less time and fewer resources.
• Risk management: As all other agreements do, MSA can reduce the risk element of a business relationship. It involves clauses related to confidentiality, liability, IP rights etc, which protect both parties.

MSA checklist – What should be included in an MSA?

To avail these above mentioned benefits, it is important to include all the key elements of MSA. Here’s a checklist of all the key components a basic master service agreement must have:

• Scope of Work: Scope of work refers to the service or product that will be covered in the agreement. It also includes the deliverables and timelines related to that product or service.
• Payment Terms: This section covers all the queries related to payments like total fees, payment schedules, extra payments, advance payments, etc.
• Confidentiality: To protect sensitive information it is important to include confidentiality clauses in MSA. 
• Intellectual Property (IP) Rights: This section clearly states the details regarding the ownership of IP that is created during the creation of the project. 
• Limitation of liability: If the project causes any damage or loss, this section protects each party by stating the extent of their liability.
• Indemnification: If the project causes any loss to any of the parties involved, this section states the compensation (if any) is owed by the other party. 
• Dispute Resolution: This section includes the process or steps involved in resolving potential future disputes.
• Taxes and fees: This section states which party has the liability to pay any tax or fees arising from the project.
• Warranties: Any warranties provided by any of the parties are stated in this section.
• Termination Clause: It is crucial to add termination clauses in MSA as it details the circumstances or situations in which the contract can be terminated and the impact of such termination.
• Amendments: This section specifies how the MSA can be altered and the steps involved in this process.