A Master Services Agreement (MSA) is an agreement that governs the business and legal association between parties. Unlike a standard contract, an MSA covers the entire relationship when the parties want to continue to work together even after the first few projects are finished. Instead of repeatedly making a similar contract, the parties can create a Master Services Agreement that governs every project they work on together. The experienced California business attorneys at Von Rock Law assist business clients with creative and efficient solutions, such as creating master services agreements. Contact us to learn more about MSAs and our other business services: (866) 720-0195.
The Basics of a Master Services Agreement
A master services agreement sets out the expectations of both parties to the contract and describes how the contract will function, often year after year. It is a broad document that provides the major features of the agreement between the parties. For instance, a shipping agreement between a business and a trucking company likely will not provide specific information, such as delivery dates and times. It will, however, will set out the general expectations for each load.
In most cases, MSAs are used in B2B (business-to-business) relationships. The government will also frequently uses MSAs for long-term relationships (such as contracts with the Securities Exchange Commission). They provide a “statement of work” (SOW) that sets out an order and delivery process. Parties can use MSAs for both goods and services. MSAs work well for relationships that are expected to generate a high volume of work, sometimes very quickly.
The Benefits of an MSA for All Parties
The most significant benefit for everyone involved in the MSA is that they negotiate one contract and then do not have to do any other major negotiation for the rest of their relationship. It streamlines the contract creation process, often saving everyone time and money.
While MSAs are broad, they are specific enough that everyone can understand how the relationship will function. After the master services agreement is drafted, each party should fully understand how they are expected to work together.
The Drawbacks of an MSA
Because an MSA is supposed to govern a relationship for a long period of time, it often needs to be very comprehensive. The terms can be cumbersome and complicated, but they may need to have that level of detail to be effective if a dispute arises.
It is difficult to predict every potential dispute or fact pattern in the future, but an MSA attempts to do that, which makes it even more complicated. In addition, attempts to address future events can make the contract very inflexible. That lack of flexibility can cause serious tensions between the parties. Further, creating these complicated documents often requires the careful drafting of an experienced attorney—and Von Rock Law might be able to help with this type of drafting.
Terms Often Contained in a Master Services Agreement
Every MSA is different, but many have the same general terms. These terms vary by industry and the relationship between the parties.
- Scope of Services: This section sets out the “meat” of the agreement between the parties. It provides what each party will do to fulfill the terms of their contract. In a transportation agreement, one party might agree to assign truckloads to the other party and pay for those shipping services. The second party then agrees to carry out the shipping services in exchange for payment. Scope of services also often has a corresponding payment terms schedule that might be attached as a separate document (for easier editing and updating).
- Limitations on Liability: Liability limitations sections will often include language that one party is not legally responsible for the other party’s wrongdoing. If the shipper damages property, for instance, they must often hold the other party harmless, so they are not responsible for reimbursing the final customer for any damage.
- Warranties: The warranties section often addresses quality of work. It might also indicate that certain minimum licensing or other regulatory requirements must be met as a condition of the continued relationship. In the shipping example, keeping up with Department of Transportation licensing might be a specific requirement.
- Dispute Resolution: Sections addressing dispute resolution will describe the process necessary to handle any possible disagreements. For example, the parties might wish to first engage in informal discussions to resolve the issue, then move to mediation and, finally, litigation.
- References to other Documents: An MSA will also often include specific references to other critical documents, such as purchase orders, shipping agreements, service level agreements, and bills of lading.
- Insurance Requirements: Many MSAs also provide a specific minimum level of insurance one, or both parties must carry. It might also include terms about how insurance claims will be handled, including that both parties should cooperate with insurance claim investigations.
- Independent Contractor Clause: Many MSAs also specifically set out that neither party is considered an employee of the other. While these clauses may seem unnecessary, they can be helpful in clarifying roles in situations where individuals get injured or cause damage to others.
- Product Defects and Delayed Payments: Not every business relationship or agreement will go as planned. One of the many goals of an MSA to address problems before they arise. Sections that address things like delayed payments and product defects describe how each of these common areas of concern will be addressed if they arise.
- Termination: The MSA should also include a section stating how one or both parties can terminate the agreement. It might define specific termination methods, renewal periods, or notice requirements.
- Choice of Law: Many MSAs involve companies physically located in more than one state or performing services in more than one state. As a result, it can be challenging to determine which state’s laws to apply if there is a dispute. The parties can often avoid this issue by stating which state’s law applies and where litigation should start if a dispute arises.
Contact an Experienced California Business Attorney To Learn More
An MSA that governs a transportation company will look very different compared to one that provides ongoing utility services. Having an MSA tailored to your particular business is critical—cookie-cutter MSAs will often cause more costs and damage compared to the money you save in creating them. The dedicated business attorneys at Von Rock Law have experience drafting MSAs across a wide variety of industries. Learn more by contacting our team today at (866) 720-0195.
