Key takeaways:
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Implement master service agreements to accelerate contract negotiations by establishing foundational terms once, allowing your team to focus subsequent negotiations solely on project-specific details through statements of work rather than renegotiating basic business terms for every engagement.
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Include comprehensive coverage in your MSA for all potential business scenarios including confidentiality, intellectual property rights, dispute resolution procedures, and termination clauses, as research indicates that half of all contracts lack proper governance and escalation paths that prevent costly disputes.
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Reserve MSAs for long-term, ongoing business relationships where you anticipate multiple projects or phases of work over time, as simple one-time transactions are better served by standard contracts that don’t require the complexity of a master agreement framework.
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Establish clear responsibilities, escalation procedures, and remedies for performance issues upfront in your MSA to proactively address potential conflicts before they arise, preventing delays and preserving the core business relationship even when circumstances change.
A Master Service Agreement (MSA) is a contract that establishes the foundational terms and conditions for all current and future business activities between parties. MSAs eliminate the need to renegotiate basic terms for each new project, cutting down on the administrative work needed for ongoing business relationships. Given that most contracts take a month or longer to complete, this faster process is a key advantage.
With an MSA, additional contracts do not need to be renegotiated, and the basics of the initial agreement can be included in all future contracts. While the tech industry uses MSAs most frequently, these agreements are appropriate for any long-term, ongoing business relationships, including client/vendor interactions, government contracts, and union negotiations.
What is an MSA and what does it do?
An MSA establishes governing terms for ongoing business relationships. The agreement covers foundational elements that remain consistent across multiple projects or transactions.
MSAs provide three key advantages. First, they speed up future contract negotiations by eliminating the need to renegotiate standard terms. This is a significant benefit, as MSAs are negotiated around 70% of the time, according to The 2025 Contracting Benchmark Report. Second, they create predictable business frameworks that both parties can rely on. Third, they reduce legal costs and administrative time for subsequent agreements, which is crucial since poor contract management can cause an erosion of value equal to nine percent of annual revenue.
What makes MSAs particularly powerful is their flexibility. While the foundational terms stay consistent, you can still adapt to new circumstances by addressing specific project requirements through separate documents like Statements of Work, all while maintaining the core relationship framework that governs every interaction.
The basic terms that MSAs typically cover include:
- Confidentiality
- Product delivery
- Dispute Resolution
- Geography
- Intellectual Property rights
- Limitations of liability
- Payment terms
- Venue
- Warranty
- Work standards
The types of agreements governed by an MSA can include:
- The ownership of property in a development
- Royalties associated with new inventions or discoveries
- How new information can be released while maintaining confidentiality agreements
- Indemnification in the event of a third-party suit
- Alternative dispute resolution and allocation of attorney fees
- Work schedules that are dependent upon local job conditions
- Purchase orders and pricing variations based on economic factors like materials cost, cost-of-living, etc.
Why use a master service agreement?
By using MSAs, organizations spend less time on contract management. Organizations using MSAs reduce contract negotiation time by focusing discussions on project-specific details rather than foundational terms.
This faster approach works because basic business terms are already established. This is particularly important for MSAs, which typically require legal team involvement in 85% of cases, according to the report. With the foundational agreement in place, legal teams can concentrate on unique project requirements, pricing variations, and specific deliverables for subsequent SOWs. This focused negotiation process prevents delays and reduces the risk of fundamental disagreements disrupting individual deals.
Beyond efficiency, MSAs provide strategic advantages for long-term partnerships. They give both parties the framework to plan for future growth and adapt to changing business landscapes. You can identify potential areas of conflict early and address them proactively, rather than scrambling to resolve issues under tight project deadlines, which is critical when poor supplier performance can result in higher total costs of 10 to 20 percent.
This forward-thinking approach is particularly valuable for relationships that need room to evolve. The flexibility built into MSAs helps prevent disputes and preserves the core business relationship even when circumstances change, ultimately saving both parties time and money.
An MSA should delineate responsibility if any of the following events should occur throughout the business relationship, like:
- Employee injury or death
- Property damage
- Missed deadlines
- Failure to pay
- Unsatisfactory performance or service
- Product defects
- Unauthorized charges
- Miscommunication
What should be included in an MSA?
Effective MSAs require comprehensive coverage of potential business scenarios. The agreement should address both routine operations and exception handling to prevent future disputes.
The key is to think through common challenges before they arise. Rather than leaving gaps that force you back to the negotiating table later, your MSA should establish clear escalation procedures, define responsibilities for unforeseen circumstances, and outline remedies for performance issues.
At a high level, your MSA should include:
- All possible issues that could arise throughout the business relationship
- What actions both parties will take together
- Individual responsibilities assigned to each party
When it comes to determining each party’s individual responsibilities, it’s essential to understand where conflict may arise. For the purposes of an MSA, parties should establish who is in charge when an event or responsibility occurs—so that all required elements to fulfill the negotiated agreement are covered.
Areas an MSA should address include:
- Product and project management Who will be responsible for the delivery and installation of a product or service and who is in charge if something goes wrong?
- Employee management Each party should list requirements for potential employees and background checks, and other employment screening activities.
- Income and expense. Determining how a cost is projected and how payments will be procured and processed.
- Insurance coverage. Who will handle insurance acquisition, and what penalties will apply if the party responsible fails to acquire and maintain the agreed-upon insurance coverage?
- Escrow and security. Who supplies backup funding and payment for the protection of the project or product?
- Requirements and liabilities. Where will the work occur? Who will be responsible for complying with local, state and federal regulations and risk mitigation?
- Taxes. Who will track taxes and how tax liabilities will be allocated and reconciled?
- Third-party coverage and concerns. How will actions involving a third party be handled, and who will be responsible for addressing these third-party issues or disputes?
- Termination. What happens in the event the business agreement is terminated?
MSA vs. other contract types
MSA vs. SOW
Think of it this way: the master service agreement is the rulebook for the entire game, and the statement of work (SOW) is the playbook for a single play. The MSA sets up the general terms of your relationship with a vendor—confidentiality, payment terms, liability, all that foundational stuff. You agree on it once. The SOW comes in for specific projects. It details the exact work to be done, the deliverables, timelines, and project-specific costs. You’ll have one MSA and potentially many SOWs under it over time. This way, you’re not renegotiating the entire relationship every time you start a new project.
MSA vs. SLA
This one’s about the big picture versus the nitty-gritty of performance. The MSA, again, is the high-level agreement covering the legal relationship. A Service Level Agreement (SLA) gets much more specific about the standards of service by defining measurable metrics like uptime, response time, and support availability. This is a critical component, as research shows that more than 75 percent of contracts lack a comprehensive set of key performance indicators (KPIs). Often, an SLA is an exhibit or part of an SOW that lives under the main MSA. The MSA says ‘you’ll provide the service,’ and the SLA says ‘here’s exactly how well that service must perform, and what happens if it doesn’t.’
MSA vs. NDA
This is a common point of confusion, but it’s pretty straightforward. An NDA, or Non-Disclosure Agreement, has one job: protect confidential information. That’s it. An MSA is a much broader agreement that governs the entire working relationship, including services, payment, and liability. Most MSAs will have a confidentiality clause within them that functions like an NDA. But you might sign a standalone NDA before you even discuss an MSA, just to protect information during initial talks. The MSA is the main event; the NDA is just one piece of the puzzle.
Master service agreement checklist
Essential clauses
- Definitions. Clearly define key terms used throughout the agreement to avoid ambiguity.
- Services. Define the scope of services provided, including details like deliverables, timeframe, and location.
- Payment terms. Specify pricing, payment schedule, invoicing procedures, and preferred payment methods.
- Term and termination. Outline the contract duration, renewal options, and termination clauses for various scenarios.
- Confidentiality. Protect sensitive information exchanged between parties with clear obligations and durations.
- Intellectual property rights. Address ownership, use, and licensing of intellectual property created during the service provision.
- Warranties and disclaimers. Define the level of quality expected and any limitations of liability for both parties.
- Indemnification. Specify circumstances and obligations for compensating each other for potential losses.
- Dispute resolution. Outline the process for resolving disagreements, including options like mediation or arbitration. This is a crucial step, as research shows half of all contracts lack clauses for governance and escalation paths.
- Force majeure Address how unforeseen circumstances impacting service delivery will be handled.
- Governing law and jurisdiction. Specify the legal framework and courts applicable to any disputes arising from the agreement.
Additional considerations
- Independent contractor status. Clarify the nature of the relationship between the parties (e.g., independent contractor vs. employee).
- Notices. Define how official communication between parties will be conducted.
- Amendments and waivers. Establish procedures for modifying the agreement and addressing potential breaches.
- Entire agreement. Ensure the document supersedes any prior or contemporaneous communications.
- Severability. Specify that invalid provisions won’t affect the enforceability of remaining clauses.
Remember, this checklist provides a general framework, and specific inclusions may vary depending on the nature of your services and business relationship.
Speed up your contracting process with MSAs
Master Service Agreements transform contract management from reactive to strategic. Organizations with well-structured MSAs report faster deal closure, reduced legal costs, and stronger vendor relationships, with some sales leaders seeing 29 percent fewer deal delays when using advanced agreement management systems.
The framework approach delivers consistent results because it balances standardization with flexibility. Your legal team maintains control over essential terms while enabling business teams to move quickly on new opportunities.
Ready to implement MSAs that speed up your contracting process? Modern contract lifecycle management platforms make it easier to create, manage, and improve master service agreements across your entire organization. Request a demo today to see how the right tools can streamline your MSA workflows.
Frequently asked questions about master service agreements
Can you change an MSA after it’s signed?
Yes, but you have to follow the process laid out in the MSA itself, usually in a clause called ‘Amendments.’ You can’t just decide to change things informally. Both parties need to agree to the changes in writing, typically through a formal amendment document that everyone signs. This ensures there’s a clear record of what was changed and that everyone is on the same page.
Do you need a new MSA for every project?
No, and that’s the whole point. You create one MSA to govern the overall relationship with a vendor. Then, for each new project, you’ll typically use a much simpler document, like a Statement of Work (SOW), that falls under the umbrella of the existing MSA. This saves a ton of time because you’re only negotiating the project-specific details, not the entire legal framework.
When is an MSA not necessary?
If you’re engaging in a simple, one-time transaction with a vendor and don’t expect to work with them again, an MSA is probably overkill. A standard contract or purchase order that covers that single transaction is usually enough. MSAs are really designed for long-term, ongoing relationships where you anticipate multiple projects or phases of work over time.
Ironclad is not a law firm, and this post does not constitute or contain legal advice. To evaluate the accuracy, sufficiency, or reliability of the ideas and guidance reflected here, or the applicability of these materials to your business, you should consult with a licensed attorney. Use of and access to any of the resources contained within Ironclad’s site do not create an attorney-client relationship between the user and Ironclad.
