Take 5: Considerations For a Master Services Agreement

If you are a service provider, a Master Services Agreements (“MSA”) is often the foundational document that governs the relationship between you and your clients. An MSA establishes the framework for future transactions and sets forth the rights, obligations, and responsibilities of each party. The following are key points to consider when reviewing or drafting your MSA.

1.               Defining the Scope of Work.

One crucial aspect of any MSA is defining the scope of work (“SOW”). The SOW outlines the specific services to be provided to the client by the service provider and the expectations of the client. You will need to determine if your SOW will be included within the MSA itself or as a standalone document attached as an exhibit and incorporated into the MSA.

 Defining the SOW within the MSA can streamline the contracting process. On the other hand, keeping the SOW separate allows more flexibility in negotiating specific terms and project details without having to amend the entire MSA. Ultimately, the decision depends on the nature of the relationship between you and your client and each party’s preference. Regardless of the approach taken, it is essential to clearly define the initial scope of work.

2.               Handling Change Requests.

Changes often arise during the course of a project that fall outside the scope of the original agreement. It is essential to establish procedures for handling change requests in the MSA to ensure that both parties are on the same page.

This may involve formal change request forms, approval processes, and mechanisms for adjusting pricing and service delivery timelines. Clearly delineating up front how changes will be addressed helps minimize disruptions to the project and maintains the integrity of the agreement.

3.               Ownership of Intellectual Property.

Intellectual property (“IP”) considerations are paramount in any agreement, including an MSA, particularly regarding any IP developed during the course of the engagement. The MSA should clearly define if any IP falls under the “works made for hire” as it is defined in the United States Copyright Act and should specify ownership rights to any IP created, including software, designs, or other deliverables. Additionally, issues surrounding the use of third-party IP should be addressed. This may include obtaining necessary licenses or permissions and indemnifying the client against any claims of third-party IP infringement.

4.               Confidentiality Provision.

Although you may have a Non-Disclosure Agreement in place with your prospective client as you are negotiating the services to be provided, the NDA will often expire upon the execution of an MSA.  Therefore, including a Confidentiality provision in the MSA itself can be critical.

Any confidentiality provision should define what constitutes confidential information, the obligations of each party regarding its protection and use, and any exceptions to confidentiality. The confidentiality provision should also specify the duration of confidentiality obligations, including during the MSA and after its termination and the consequences of breaches.

5.               Indemnification and Limitation of Liability Provisions.

To allocate risk between the parties, an MSA will often include provisions for mutual indemnification and limitation of liability. Indemnification clauses typically require each party to indemnify the other against certain specified claims or losses arising from conduct of one party.  An indemnification provision will often be mutual.

Limitation of liability provisions, on the other hand, cap the amount of damages that can be recovered in the event of a breach or dispute.

This article is meant as a brief introduction to issues to consider when putting together your MSA.  If you have questions about an MSA you’ve been asked to sign, or would like assistance drafting your own MSA, we’d love to connect!

LetsGo@cruxterra.com