A master service agreement or MSA is a contract between two parties to simplify the negotiation procedure when entering a service transaction. It explains both parties’ expectations by stating their responsibilities and the terms and conditions that will regulate every current and future activity. It provides a comprehensive and binding framework for the delivery of services, ensuring legal and contractual clarity, specifying the rights and responsibilities of both parties, and establishing a standardized process for future service transactions.
An MSA provides the parties with an overall understanding of what they must do to hold their end of the bargain and ensures simpler and faster future contract processes. This is because it establishes a framework that forms the bedrock for all actions in the future. An MSA is crucial for longstanding relationships that require security and space to grow.
The master service agreement definition refers to a contract that two parties enter into to streamline the negotiation process. Both parties state the deal’s terms and conditions at the outset. This enables them to form business relations and simultaneously refine their expectations, rights, and responsibilities.
By laying the foundation of their relationship using such a contract, both parties can focus on the contract specifics instead of the basics without derailing their foundational agreement. This helps the parties to make plans and adapt to the changes in the business landscape. Moreover, an MSA eliminates the pressure of deadlines, giving the parties time to adjust and respond.
Such a contract must outline the responsibilities of the parties involved if any of the events mentioned below occurs.
The more the parties plan for the above potential conflicts in the contract, the lesser the chances of disputes arising.
A few common master service agreement clauses are as follows:
Let us look at a few master service agreement examples to understand the concept better.
In January 2023, CNTXT, one of the leading providers of digital transformation and cloud solutions in Saudi Arabia, signed a digital MSA with Saudi Aramco. This agreement will enable the latter to use Cognite Data Fusion® and expedite the deployment and development of digital use cases by making the most of CNTXT digital services. Moreover, the contract will simplify future negotiations between both companies.
TechnipFMC and Petrobras have entered a master service agreement worth a minimum of $250 million. The contract includes tooling and equipment installation, maintenance, and intervention. Moreover, this agreement covers technical support flowlines, risers, and subsea umbilicals.
The following are the benefits of master service agreements:
Although MSA, statements of work, and service level agreements have a few similarities, one must remember that they are different concepts. Therefore, one must learn how they differ and understand their meaning and purpose fully. In that regard, looking at their distinct characteristics is imperative.
| Master Service Agreement | Statement Of Work | Service Level Agreement |
| This contract establishes the legal framework for the two parties’ business framework. It specifies the terms that will govern their activities. | A statement of work is a contract that regulates a particular transaction. For example, it offers a description of a certain project’s requirements. | This contract is signed only between a customer and a service provider. It specifies the standards and types of services that the latter will offer. |
| Some common clauses of an MSA are confidentiality clause, termination clause, and dispute resolution clause. | A few common clauses in a statement of work are hourly rates, dates and deadlines, and scope of work. | In such a contract, the common clauses are standards of service, each party’s responsibility, and delivery time scales. |
The following are some components that are crucial when evaluating, creating, or negotiating an MSA:
- Risk allocation
- Intellectual property
- Insurance
- Geographic location
- Tax responsibilities
- Payment terms
- Government requirements
- Warranties
- Termination
- Background checks
An organization may consider an MSA necessary during negotiations if they do not wish to take accountability for any mistake made by the other party. Businesses can ask their legal team to draft the agreement. Alternatively, they can hire a lawyer to draft it for them.
How long does a master service agreement last?After signing an MSA, both parties can utilize it without continuously renegotiating the contract’s terms. Instead, once the legal terms are established, the parties can negotiate individual statements of work that focus on payment terms and services specific to projects.
Is master service agreement the same as NDA?An MSA is not the same as a non-disclosure agreement. The latter lends security to the details shared by a party. In contrast, an MSA ensures that both parties are on the same page.
This has been a guide to what Is A Master Service Agreement. We compare it with the statement of work & service level agreement, its examples, and benefits. You can learn more about it from the following articles –
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