What is a master services agreement, and why does it matter?
When working with your clients, you always want to ensure that you cover the legal aspects. It can quickly become a time-consuming hassle to repeatedly draft and sign the same elements of an agreement every time you work together. A master services agreement takes care of this for you.
But, creating a master services agreement is not always as easy as you may hope. Creating legal documentation is always a challenge as there is no room for error. To make it even more complicated, some agreement elements may change based on the client or state.
Our master services agreement template can help you overcome these challenges. You will not have to worry about forgetting to include a part or addressing the intricacies of the legal language involved. To make the most of the template, you will want to make sure you understand what a master service agreement is, how it differs from other documents you may use, and the elements to include in creating one.
What is a master services agreement? What is the purpose of a master services agreement?
Agencies that work with a range of clients can benefit from master service agreements, as they save you the time and hassle of creating new legal documents from scratch every time you work with a client.
Master services agreements are contracts that outline the majority of the terms between you and your clients, being the two parties involved.
How master service agreements benefit companies
The main benefit of a master service agreement is that the user will save time and effort. It allows you to take care of most, if not all, of the negotiation at the beginning of your working relationship with a client. This saves the need to rehash contracts.
MSAs are ubiquitous in any type of long-term relationship between clients and vendors or agencies and clients. They are common in government contracts, union negotiations, information technology, and marketing.
Master services agreements help service providers (like your marketing agency) protect you from liability and secure your revenue streams. They help your clients by ensuring they receive the required services at the agreed-upon time.
While master service agreements make life easier for your company, our fill-in-the-blank template makes creating them even easier. You can draft the MSA in a matter of minutes instead of having to spend days working on it.
What is the difference between MSA and SOW? MSA vs. SOW
While a master service agreement is important, it is just one of several legal documents you will likely use. Another is the state of work or SOW.
The most significant difference is that while the MSA spans your entire relationship with your clients, an SOW focuses on a single project or a smaller scope of work.
If you study the parts of each closely, you will notice that those of a master service agreement tend to be much more wide-reaching than those of a statement of work.
For example, MSAs typically cover things such as:
- General services
- Deliverables
- Project management
- Support and deployment
- Audits
- Payment and expenses
- License grants
- Proprietary rights
- Warranties and representations
- Terms and termination
- Confidentiality
- Insurance
- Indemnification
All of those are more long-term considerations that last for an entire working relationship. By contrast, the following are common focuses of SOWs:
- Requested services or the project
- Project phases
- Billing rates
- Resource hours
- Proposed deliverables
- Beginning and end dates
- Payment schedule
- Representatives from both parties
As you can see, those are much more project-specific.
That said, the distinction is not set in stone. MSAs and SOWs can have some overlap. You and your client can define them however you choose. Both allow room for customization, depending on your needs and the client relationship.
What are the key components of a master service agreement – the individual pieces of a master service agreement
As you start to craft a master service agreement or use our master services agreement template, you will notice that the document can vary based on numerous factors. The most common variations are based on the state you are in. There may also be other deviations, such as whether you want witnesses to be present when you sign the document.
The following are the key components that you are likely to include in a master services agreement.
Excluded Services
Most master services agreements will feature exclusions. An example would be a company that provides sales training limiting the warranty in regard to post-training sales.
Warranty
This section may indicate that you will provide services according to industry standards or that you may make reasonable efforts to deliver the services while meeting certain specifications or criteria.
Intellectual Property
The agreement should outline who owns the intellectual property created as part of the business relationship. There are several possibilities, including:
- Intellectual Property Owned by the Customer: This is when the client wants to own the IP behind the deliverables you create for them.
- Background or Pre-existing Intellectual Property: This refers to IP that you already created before starting the relationship with the client.
- Customer Intellectual Property: This is the IP that the client brings.
- Third-party Intellectual Property: This accounts for third-party intellectual property that you or your client uses during the business relationship.
Limitation of Liability
This section can dramatically reduce your contractual liability in certain situations. This type of clause can even reduce your insurance premiums. This section can also feature a maximum amount of liability that your company or your client can have.
Indemnification
These provisions can move the risk from your party to the other party in the agreement, which would be your client.
Payment Terms
This part of the master service agreement should include information on when payments are due, that the payments be made promptly, and that there will be interest (with the amount specified) on late payments. It should also include your ability to recoup collection costs if you need to hire a lawyer to help collect the debt.
Termination
The master services agreement should include when the agreement ends. It should also cover early termination, including when either party can terminate the agreement early and the penalties they face for doing so.
Dispute Resolution
Although not all MSAs feature it, it is also ideal to have a section dedicated to outlining how you will resolve any disputes. This can help prevent you from terminating the agreement if there is a disagreement. That is important as termination can cause your agency to lose a lot of money. Essentially, this section helps ensure that you receive payment for your services.
Remedies
You may also want to include a separate section on remedies or include them under dispute resolution. This section would outline how you would make it up to the customer if you fail to deliver certain services. It is also sometimes part of the warranty.
Confidentiality
Traditionally, this section of the master service agreement is about the agreement itself and potentially in terms of projects and services. Today, it typically also includes aspects of data security and data protection.
Service Provider Personnel
Your MSA may list the specific people who deliver the services covered in the agreement.
What is the typical duration of a master service agreement? – Major trends influencing master service agreements
There is no single trend as to how long a master service agreement lasts. This depends entirely on you and your clients. Many come to last for years, throughout the entire business relationship.
However, there are also shorter-term master service agreements. For example, some may only last 30 days after a project is complete.
The general rule of thumb is that you want your master service agreement to be long enough that it will save you time as intended. At the same time, you want it to be short enough to let you renegotiate when the need arises. Another option is to create an agreement spanning a year but includes automatic renewal.
Conclusion – why you should care about a master services agreement
Creating a master services agreement allows you and your clients to save time on future projects by taking care of all the necessary negotiations ahead of time. With an MSA, you handle the most important legal details once every few years (or at your chosen intervals) instead of having to discuss them again before every single project. Most agencies will supplement the long-term nature of an MSA with statements of work for each individual project.
To save you the hassle of drafting a master services agreement from scratch and risking forgetting a section, we have created an MSA template for you to use. You can easily adapt it to your needs.
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Free Master Services Template: Download Here
