Drafting A Master Services Agreement

Author: Ian Aldridge, Progressive Legal

When you’ve got a growing business, it can be hard to keep track of all the legal contracts you need. One important document that many small business owners in Australia may overlook is a Master Services Agreement (“MSA”).

This type of contract sets out the details and responsibilities of both parties (the service provider and the customer). A MSA covers things such as payment terms and timelines for the delivery of the product or service. It also serves as the basis for any future service contracts that you may enter into with that same customer. In other words, a MSA aims to prevent you having recurring clients constantly sign the same document when regularly engaging or using your services.

In this post, we explore the key elements of an MSA and provide some tips on how to draft one for your business in order to ensure smooth business practice and potentially limit your legal liability.

Master services agreement: a brief overview

Australia’s business landscape is dynamic, with new competitors and opportunities popping up all the time. The MSA is a way to establish some legal parameters as to how you will interact with customers over the lifetime of your business relationship. Think of it as a roadmap that will guide your business relationships presently, and into the future.

An MSA typically covers three key areas: scope of services, payment terms, and dispute resolution. These are the foundations of all written contracts and should be clearly outlined in the MSA. However, it is also important to reflect on the nature of your business and identify other clauses/ issues which may be applicable in your MSA.

What are essential terms to incorporate in a master services agreement?

A standard form contract can be used to make the process of drafting an MSA easier. However, there are some critical elements that should be included regardless of the form you use.

Scope of Services

This section outlines the services that are to be provided and their respective cost. It also details who is responsible for the delivery of these services and how they should be measured. A clear scope prevents misunderstandings down the line.

Payment Terms

In this section, you will set out the payment terms for the services being provided. MSAs usually include a payment schedule that breaks down costs, timeline and payment deadlines. It is also important to include any late fees or additional charges in this section.

Liability and the Dispute Resolution Process

During the lifetime of your business, it is more than likely that you will experience a customer complaint or dispute. In such instances, it is important that your MSA considers the issue of liability in order to not open yourself up to considerable legal stresses and costs.

Further to this, the dispute resolution section outlines how any disputes between the two parties will be resolved. This could include arbitration, mediation or litigation. It is important to be clear in this section, so both parties know their rights and responsibilities in the event of a dispute.

Other clauses to consider in a master services agreement

A MSA can be carefully tailored to your business, and any other matters you wish to address should be considered when drafting the document. Some other clauses to consider  implementing in your MSA include:

1. Intellectual Property Rights and Ownership

If the nature of the business relationship is one which involves the use of Intellectual Property, it is imperative that this is addressed in the MSA. For instance, it is important to consider existing and new materials. For example, if your client has material which is already owned or licensed by it (existing material), then you require permission to use such material during the performance of the service.

2. Termination

It’s extremely important to include a termination clause in your Master Services Agreement. This will help ensure that the agreement can be dissolved if one or the other party is not adhering to its terms. Some common reasons for termination include failure to pay, breach of contract, or a material change in circumstances.

3. Warranty

It is good business practice to incorporate warranty terms into your MSA, this will allow you to address the standards of performance expected of your business during the delivery of your products or services.

4. Management of Products and Services

It is important to identify how the delivery of the product or service will occur, and who is responsible for dealing with situations which have gone wrong.

5. Taxes

A MSA should consider the allocation of tax liability between the customer and service provider.

6. Jurisdiction of law

A MSA should explicitly identify which jurisdiction the agreement applies to.

7. Indemnification

Having indemnities allows you to consider the allocation of risk between you as the service provider, and the customer. However, indemnities can be complex and actually expose you to more legal liability so it is best to seek detailed legal advice on this.

8. Confidentiality

Many MSA’s contain confidentiality terms. Such terms are directed at the protection of certain information that may become available during the operation of the MSA. This includes, and is not limited to: personally identifiable information and private data.

Key takeaways

Progressive Legal has been working with small businesses in Australia to draft Master Services Agreements since 2016. We can provide expert and professional advice on how to create a comprehensive MSA and handle any legal issues that may arise. Call us today to take the first step in your business’ future.

Master Services Agreement: FAQs