If you are planning to operate any business/
project or provide services in future it is preferable to execute Master
Service Agreement (MSA) which is created between two or more parties where both
parties agree to most of the terms that govern the future transactions. It
stands as strong foundation for a business to be conducted in the future.
There are various sectors/ areas under
which this type of agreement can be executed such as HR, Finance, Marketing etc.
Typically, the MSA outlines the business relations in general terms which
focuses more on terms of payment, description of services, duration, dispute
resolution etc,.
Purpose
of this agreement
A Master Service Agreement is generally a long-term agreement which outlines
the scope of services and other related terms in detail in a ‘Statement of Work’
before starting the business.
Benefit
of MSA
§ Execution of Master Service Agreement is one of the time effective
method as the terms specified in the agreement related to work is not
repetitively negotiated
§ It maintains a
business relationship between the parties which results in consistent work
without any hassle in future.
§ Written description of the services is always a
welcome option to avoid the disputes
§ By inserting the liability clause, it protects the latter parties
from loss caused by the fisrt party
What
Does A Master Service Agreement Usually Cover?
Before
entering into Master
Service Agreement, first of all the parties need to focus on the below
factors:
- What
and how the companies will do the business together;
- Risk
that the parties might face during the operation of business;
- Who
will be liable for the loss incurred.
Listing
of below mentioned potential items in advance avoid the uncertainties in
future. So, following are the terms that should be focused to incorporate in
MSA
1. Scope of the
services and statement of work
This is
one of the important clause that must be incorporated in MSA which defines what
services will be provided and not provided as defined precisely in the statement of work. The more detailed
consulting contract is, the lesser will be the chances of dispute in the
future.
2. Terms of Payment:
Parties
agree to a certain amount of price as a compensation of service in the
statement of work avoids the situation which could lead to disputes in future
3. Reimbursement of
Expenses
While
executing a agreement ensure for incorporating a clause for reimbursement of all the
expenses reasonably incurred in the performance of the services provided by the
consultant.
4. Duration and it
renewal
The
time duration of the project upto which the parties will complete should be
provided which can be renewed on mutually acceptable terms.
5. Dispute
resolution or mediation
The
parties should always pay careful attention to insert a dispute resolution
clause in MSA that requires both the parties to pursue mediation and
dispute resolution mechanism in case of dispute arises in future.
6. Liability Clause
This
clause if stated clarifies that to what extend parties will be liable for the
misconduct because of their carelessness or negligence.
7. Termination
Clause
In case
of situation of breach of confidentiality, or conduct of illegal activity, the services
will be terminated. Also willful termination can occur with a prior written
notice by the parties. By inserting this clause the parties shall be relieved
from future performance of their rights and obligations under this agreement .
8. Confidentiality
This is
the most important clause of any agreement which clearly spells out that all
confidential information related to financial status, projections etc of the company
shall not be disclosed without their knowledge and consent. In case if
disclosed under the requirement of law/regulation or any order of any court/
authority it should be clearly specified in the agreement.
9. Governing Law
Agreement must
provide that the agreement shall be governed by and interpreted in accordance
with the laws prevailing and subsisting in India.
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