A master service agreement is also known as a master services contract, or simply a MSA. Whether you call it a master services agreement or a standard services contract, this types of document lays out all the details of your business relationship with another entity. It covers things like scope of work, costs, payment terms, confidentiality, ownership of intellectual property, termination clauses and so on.
Why a Master Service Agreement is Important
A master services agreement is a binding contract, so it’s important to have one in place before you start doing work for your clients. It’s your roadmap for managing client relationships, and it helps you avoid potential legal issues down the road. A good contract will help you collect on your payments, avoid disputes, and create a positive working relationship with your clients. MSAs are typically signed before any work is performed. You’ll want to make sure you have a lawyer review it to make sure it’s enforceable. Your client may also want to have their lawyer review the document.
Determine Scope of Work and Fee
The first section of your MSA is what you’re providing and how much it will cost. You’ll want to include the deliverables of your work, the estimated start and end date, the hourly rate and any other fees associated with the work. If you have an itemized list of your services, put it in the contract. If you don’t, now is a good time to create one. The contract should also state whether you’ll be using any personnel other than employees on the project. If you decide to subcontract any portion of the work, you must include a clause in the contract requiring the subcontractor to sign an agreement with the client, thereby assuming the same obligations that are outlined in the contract between the client and you.
Proposal Fee and Advance
Before you start the work, you may want to get a proposal fee. The proposal fee is non-refundable and is applied to the final invoice. If you do get a proposal fee, make sure you include a clause in the contract stating it must be deposited into an interest bearing escrow account that is separate from your operating account. This way, you’ll be able to collect on it if the customer doesn’t pay. You may also want to include an advance in the contract. An advance is a certain sum of money paid to you by the customer before you perform any services. The advance is applied to the final invoice, and you’ll be responsible for repaying the advance if you don’t finish the work. Advances are standard in construction contracts, but they aren’t as common in other industries. Make sure you have a good reason for requesting one.
Confidentiality Clause
Closing your contracts with clients is a great time to add a confidentiality clause. This is a clause that states all information pertaining to the contract (e.g. contract terms, pricing, profit and loss statements, etc.) is confidential and cannot be shared with anyone outside of the approved parties. This is especially important if you’re negotiating with a potential investor.
Intellectual Property Rights
Depending on the type of work you do, you may want to include a clause in your contract that states when you deliver the final product, you transfer all intellectual property rights to the client. This is standard in many industries like graphic design, architecture and website development. Keep in mind that this does not apply to work that is considered “work for hire.”
Termination Clause
This is one of the most important clauses in your contract. It outlines the terms and conditions for terminating the contract if either party fails to meet the terms. It’s also a good idea to include a clause that outlines how the termination of the contract affects the vesting of intellectual property rights.
Conclusion
Your MSA should be a detailed document that covers all aspects of the work you do. It should include the deliverables of the work, the estimated start and end date, the hourly rate and any other fees associated with the work. Your MSA should also include what happens if the work is terminated before completion, or if one of the parties fails to meet the terms of the contract. It’s a good idea to have a lawyer review your MSA before you send it to your client.
