What should an MSA cover?
Now that you’ve determined that you need an MSA (see our MSA 101 blog post here) or have been presented with one, what do you need to know? We consulted with Senior Commercial lawyer, Michele Koyle to learn more about what an MSA should cover.
Structure of an MSA
An MSA is not just a legal document that you finalize and put in a drawer. This is the document that will govern how you provide or receive the contracted services. If you do it right, it will guide you through the provision of the services and any issues that may occur.
An MSA has two components:
- the terms that govern how the services will be performed (the Base Terms), and
- A description of the scope of work to be performed (Statement of Work).
The term “Master Services Agreement” means that there can be one or multiple Statements of Work that can reference the Base Terms, each representing a new business deal. Putting an MSA in place means that you only have to negotiate the Base Terms one time. A reference in new Statements of Work stating the Base Terms govern is all that is needed.
Many clients feel that “if it is contained in a contract it needs to be written in legalese”. That’s simply not true. There are provisions that need to be drafted in a specific way to meet legal requirements but the majority of an MSA (in particular, the Statement of Work) is a working business document that needs to be read and understood by the business team. Drafting a Statement of Work requires a clear understanding of the business deal and your unique business. A lawyer cannot know all the intricacies of your business, but you can. Use this knowledge to initially draft the Statement of Work to reflect the deal you have negotiated.
Remember: If something goes wrong this is the document that will either protect you or be too vague to provide any assistance, costing you money or requiring you to perform additional services without payment.
How to get the most out of your MSA
When drafting your MSA you want to ensure a few things are clear:
- What services are being performed, the responsibilities of each of the parties, what is going to be created and when you want it completed (your Scope of Work);
- What are you going to pay and when (Payment Terms);
- Who is going to own what is created (Intellectual Property);
- Define any confidential or personal information that will be shared and how it can be used (Confidential Information);
- What are you going to do if there is a dispute between the parties (Dispute Resolution); and
- What happens when the relationship ends naturally or because a party has breached their obligations under the MSA (Termination).
A Common Pitfall
The biggest mistake that is made when negotiating an MSA is not clearly stating the scope of the work. If you can’t clearly outline what services are being offered, each party’s responsibilities, when payments are made and who will own any deliverables created, you shouldn’t be starting the work. Take your time in negotiating the business deal and drafting the MSA to avoid any confusion that could cost you time or money in the future.
Stay tuned for more hints on MSAs…
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