A Master Service Agreement (MSA) is a contract that establishes the fundamental agreements between two parties. It outlines the scope of the relationship between the parties, including terms and conditions for current and future activities and responsibilities. The purpose of an MSA is to minimize disagreements by providing a clear description of what each party can expect from one another. It can also be a limitation of liability or safeguard costs that may result if either side fails to deliver as promised. MSAs are usually used to lay out the legal considerations that are usually of interest to the transactional lawyers working on an agreement, while the subsidiary arrangements and agreements are, generally, more helpful to the operations teams.
The main functions of MSAs are the following:
- Outline governing contractual terms
- Allow for additional adjustments
- Allocate risks
MSAs are useful because they allow the parties to make short- and medium-term plans while also speeding the ratification of future agreements. They also outline the terms and conditions of a particular service, help to protect both parties involved, and ensure that all expectations are met. MSAs are a legal game-changer for any on-going business relationships. They establish a negotiation template and reference point that eliminates the need to recreate a new contract for every action between parties.
Whenever there is a continued or open-ended delivery of products and services from one party to another, an MSA is appropriate. MSAs are popular in industries such as IT, marketing, and human resources, in which business models frequently revolve around the provision of ongoing services.
