Master Service Agreement: What is an MSA?

One of the best things a business can do to grow is build strong relationships with good contractors. Working with people who you trust to not only do the job on time, but to do the job well is critical to ensure you’re not paying for fixes or rework down the track.

When engaging contractors, it is best practice for businesses to have a Master Services Agreement or ‘Service Level Agreement’ in place to streamline their current and future project work.

What is an MSA?

A Master Services Agreement (or MSA) is a contract which outlines the key details of the relationship between the two parties – the business and their contractor – who intend to have a long-term relationship. The contract details key points for the relationship, ensuring parties agree on the expectations for each party, the overall goals of the relationship, any payment terms, and details on how any conflicts should be resolved.

An MSA will generally be drafted prior to or alongside the first Scope of Work agreement which details the specifics of a new project which the business is hiring the contractor to complete.

What are the advantages of an MSA?

MSA’s are useful agreements to have in place for long-term relationships because they make it easier and faster to begin new projects when they arise, rather than waiting until a new contract has been drafted and negotiated each time.

Master Service Agreements outline the risks and responsibilities of each party for current and future projects. By clearly establishing roles and expectations early in the relationship, businesses can implement a comprehensive risk allocation strategy and avoid unnecessary disputes.

What types of relationships and agreements should have an MSA?

It is often ideal to have an MSAs between parties when attempting to establish a successful working relationship. It ensures that any possible disputes can be quickly and easily resolved.

MSAs should be used when the relationship between businesses and their contractors when an ongoing project will involve the creation of products by the independent contractor for the business. The MSA avoids major disputes by outlining upfront before the works begin by:

• Defining ownership of property in a development

• Defining how royalties associated with new inventions or discoveries as part of a project will be attributed

• Defining how new information can be released while maintaining confidentiality and privacy agreements

• Defining the indemnity parameters to protect the parties from legal liability resulting from actions taken relating to the project

• Defining the process for alternative dispute resolution and how any legal fees will be allocated during this process

• Defining expectations for work schedules of each party, response timelines and any regular communications requirements

• Defining the process for Purchase Orders and pricing based on economic factors like materials cost, cost-of-living, etc.

What are the elements of an MSA?

As MSAs are used to cover large, ongoing relationships between businesses and their independent contractors, they must cover a wide range of terms. These documents typically outline details on:

• Product delivery

• Payment terms

• Dispute resolution

• Confidentiality terms

• Limitations on liability

• Services warranty

• Intellectual property rights (IP)

• Termination

For more specific details on what you should include in an MSA view our MSA Template.

What are the next steps after an MSA?

Master Services Agreements are contracts frequently used to establish a working relationship between businesses and contractors. They are a useful agreement to have in place between when a business trusts and is satisfied with their contractor and intends to continue working with them for the foreseeable future.

The details in an MSA vary based on the situation and the parties involved, however the purpose remains the same – to enforce transparency into responsibilities in the relationship and protect both parties from damage or loss should a dispute arise.

Businesses who frequently employ independent contractors often have a template of all their standard requirements. Some are even leveraging legal automation technology like Plexus to simplify their MSA contracting process further and have their projects begin sooner.