Master Services Agreement: when should I get one?

If you or your business expect to have an ongoing working relationship with a customer or supplier, a master services agreement (or ‘MSA’) provides an ideal backdrop against which repeat orders can be made.

Why is it Important?

Terms governing the supply of services, whatever their nature or value, are essential for a smooth-running and successful business transaction. Having an MSA in place saves customers who frequently engage with the same supplier from having to negotiate and draft lengthy terms relating to their contractual relationship every time they purchase the services.

What it is / what should be included?

MSAs outline the terms on which a supplier agrees to supply its services. As and when those services are required by the customer, the parties then sign what’s known as a ‘statement of work’ which form part of the MSA and sets out the variables particular to the specific job (e.g. price, milestones and deliverables). In other words, a master services agreement establishes the framework under which the supplier and customer agree to contract for the provision of future services. Here are some of the things to consider including in an MSA:
  • What services are covered by the scope of the MSA? The customer doesn’t necessarily have to request all of the services every time it signs a statement of work but this section should outline the extent of the services available.
  • How will statements of work be agreed and signed off? This procedure is central to the smooth running of the MSA relationship.
  • Can the supplier refuse requests for services? If this is included, usually the customer will have a balancing right not to have to purchase from the supplier.
  • Must the customer commit to a minimum purchase value? If so, they will want the supplier to have to provide the services on request.
  • What are the supplier and the customer’s respective obligations? This may include any agreed service levels and cooperation requirements.
  • Confidentiality
  • Termination
A sample (or template) statement of work is often included at the back of the MSA to make it quick and easy for the customer to request services under the agreement.

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