Protect your contracts with a master service agreement template

Procurement

A master service agreement sets the pace for future contracts between two parties by outlining the maximum possible terms. A service-level agreement outlines the obligations and responsibilities of each party.

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Written by
Perin Adams
Published on
November 29, 2022
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Master service agreements (MSAs) are often confused with service-level agreements (SLAs). However, MSAs and SLAs are distinct in their intent, the components they cover, and what they accomplish.

A master service agreement sets the pace for future contracts between two parties by outlining the maximum possible terms. A service-level agreement outlines the obligations and responsibilities of each party.

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MSA vs. SLA

While the SLA is typical in the services industries, the MSA is unpopular because of its heavy legal jargon. However, a master service agreement is a must-have for all business relationships. Companies of any size will hit a point where you need to create an MSA.

Creating a master service agreement may seem daunting if you have no idea where to start or what to include. This tutorial aims to introduce and explain the MSA and the components involved. We will also provide you with a master service agreement template to make it easier.

Download our simple & standard SaaS MSA agreement template, a ready-to-use master service agreement template created by expert attorneys.

What is a master service agreement?

The definition of a master service agreement is a formal agreement made between suppliers and buyers. An MSA outlines essential terms and conditions of service like:

An MSA speeds up the contractual process and eliminates the need for future agreements. Both parties agree to comply with the applicable law and honor their end of the bargain.

Why do you need a master service agreement?

Did you know that most businesses overpay their suppliers by at least 10%?

This maverick spending can happen when there is no MSA in place. Moreover, commonly used project-specific contracts only cover some aspects of liabilities, leaving room for ambiguity during disputes.

Creating too many contracts wastes time. If a disagreement arises, you’re sifting through contract bundles to find a specific service agreement clause. In addition, extra contracts mean companies waste funds on attorneys' fees.

Businesses that offer more than one service need to create contracts often. Therefore, it is critical to standardize terms and subject matter usage. These businesses must also protect their revenue streams and trade secrets from consequential damages and gross negligence.

A well-drafted MSA will save money and time for both parties. It eliminates the need to negotiate rates and terms repeatedly.

Instead, companies write MSAs, which may also be called mutual service agreements, with long-term relationships in mind. The entire agreement is detailed. It covers work orders, purchase orders, pricing, responsibility allocation, and severability.

A strong master service agreement will define the boundaries of the contract and provide solutions to any potential issues, saving everyone time and money.

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Essential components of an MSA

Your procurement team must fulfill several priorities before you can finalize a SaaS software purchase.

An MSA is the most crucial priority of them all. A master service agreement covers many vital components to ensure a robust contractual relationship. It consists of several clauses that protect both parties' interests while offering dispute resolutions to any hiccups during the contractual period.

If you are in the process of creating a master service agreement, here is a checklist for designing a simple MSA. Listed below are components that typically are (or should be) included in a master service agreement.

1. Definitions

It is critical to define the terminologies clearly.

Defining the terms at the beginning of the agreement makes the interpretation easier. Then, when your team uses the defined terms across the contract, this glossary section removes any chance for ambiguity.

Capitalize the first letter of unique terms and their definitions. You should also capitalize these terms when used in the body of the contract.

There must be only one defined term for each definition. Additionally, avoid using synonyms instead of a defined word.

Examples of defined terms are: Affiliate, Authorized User, Order, Service, Documentation, and Customer Data.

2. Responsibilities

Responsibilities are the contractual obligations each party is supposed to execute under the terms of the contract. It covers aspects like each party's activities and the allotted time frame.

This section will clearly outline the provision of the agreement. It also includes updates and upgrades promised during the contractual period. It may include information about the protection of customer data, compliance, support, professional services, and the use of subcontractors.

Need an master service agreement sample? Check out our free template.

3. Access and usage restrictions

This section outlines access and usage restrictions for a customer or contractor. Access restrictions can either be physical or logical. In addition, they cover conditions related to the use of third-party products and content.

Customers must obtain permissions and consent whenever required to access customer data. They are also liable for their authorized users' compliance with this agreement. Usage restrictions can be anything from restricting the number of users to proprietary rights and reselling restrictions.

4. Fees

The fees section gets into details of how much services will cost. This section sets expectations regarding fees. It also covers when the vendor sends the invoice to the customer.

This section will also list any taxes exclusive to the already predefined fees. Usually, customers are solely responsible for paying applicable taxes. These taxes include sales, usage, excise, value-added, and other taxes suitable to such services.

5. Proprietary rights

This section outlines the limited rights granted to the customer. The company that delivers the service owns all rights, titles, modifications, and derivative works. In addition, this section outlines customer data storage, usage, and sharing clauses.

6. Confidentiality

All types of agreements include some confidentiality clauses within them. Ideally, confidential information is first clearly defined.

The classification of what constitutes confidentiality is a critical step in any contract. Then comes the protection clause, where you agree not to disclose confidential information unless it is a compelled disclosure case.

A compelled disclosure case is when the recipient must disclose confidential information due to a court order or statutory duty. In such instances, the recipient of the court order is allowed to disclose personal information.

7. Representations, warranties, and disclaimers

Warranties or representations are clauses that state a fact or offer assurances to customers about the service performed.

For example, the supplier may provide customers with a one-year or two-year warranty. During this period, the supplier will have to fix any problems free of cost.

Disclaimers clarify each party's obligations. They also emphasize that one party will not hold the other responsible for inadvertent inaccuracies.

Finally, this section lists the limitations of the warranty.

8. Indemnification

Most contracts and agreements include a section for limiting liability and indemnification. If one party has incidental losses through a third-party claim, they can receive compensation from the other party. An indemnity clause should include a couple of must-have elements:

  • Risks covered by indemnity
  • Reciprocal terms
  • Scope of the claim
  • Maximum liability cap
  • Time limits to raise a claim

9. Terms and termination

This section covers crucial aspects like the terms of the agreement, its effective date, possible suspension scenarios, and termination clauses. In addition, it fleshes out various instances that can result in the termination or possible suspension of the agreement.

For example, the terms might stipulate that either party can end the agreement with 30 days' written notice. In addition to spelling out the terms of termination, this section will also cover the effect of terminations. It will include the amount or service owed by either party, rights granted for access, loss of use, and more.

10. General provisions

The general provisions section includes insurance coverage, force majeure, waiver, statutory compliance, notices, governing law, and more.

The ‘force majeure’ clause captures circumstances beyond control that relieve either party from performing their obligations as per the agreement.

For instance, in the case of natural disasters, neither party will be held accountable for not fulfilling their responsibilities.

The agreement will state which court will handle any disputes that come up.

Both signing parties typically have insurance to cover any personal injury or property damage.

Simplify things with a master service agreement template

You and your legal team can now create a master service agreement using the knowledge you have gained.

Or, you can download a free, ready-to-use master service agreement example like Vendr’s simple & standard SaaS contract.

This MSA template, authored by industry and legal experts, helps eliminate MSA hassles. Skip redlining, sell faster, and maintain legal protection with our standard agreement.

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Perin Adams
GTM Business Systems
Perin is the GTM Business Systems Analyst at Vendr, responsible for analyzing and optimizing the company's go-to-market systems and processes.

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