Master Services Agreements
Contract Types
Master Services Agreements
When two companies expect to work together on multiple projects over time, a Master Services Agreement establishes the legal framework that governs the entire relationship. Rather than negotiating a new contract for every engagement, the parties agree once on the core commercial terms — and then execute individual Statements of Work to define the scope, timeline, and pricing for each project. Understanding how an MSA works, and how it interacts with the documents attached to it, is essential for any business that regularly engages service providers or clients.
What This Contract Is
A Master Services Agreement (MSA) is a contract that sets the overarching terms and conditions governing an ongoing commercial relationship between a service provider and a customer. The MSA addresses the legal and commercial framework — liability, indemnification, intellectual property, confidentiality, payment terms, and termination — while individual Statements of Work (SOWs) define the specific services, deliverables, timelines, and pricing for each engagement. This two-document structure allows the parties to move quickly on new projects without renegotiating fundamental terms each time. The MSA is the foundation; the SOW is the blueprint for each specific project.
When It's Commonly Used
- •A company regularly engages a technology vendor, staffing firm, marketing agency, or professional services provider for multiple projects.
- •A service provider wants to establish standard terms that apply across all of its client engagements.
- •Two companies anticipate an ongoing commercial relationship and want to avoid negotiating a new contract for every project.
- •A large enterprise is onboarding a new vendor and wants a single agreement that governs all future work.
- •A company is entering a managed services arrangement where the provider will deliver ongoing operational support.
- •A software development firm is engaged to build and maintain a client's technology platform over multiple phases.
How the Agreement Is Generally Structured
Master Services Agreement
The core document that establishes the legal framework for the relationship — liability, indemnification, intellectual property, confidentiality, payment terms, dispute resolution, and termination.
Statements of Work (SOWs)
Individual documents that define the specific services, deliverables, milestones, timelines, and pricing for each project or engagement. Each SOW is incorporated into and governed by the MSA.
Service Level Agreements (SLAs)
Performance standards the provider must meet — such as uptime, response times, and resolution targets. SLAs may be included in the MSA, in individual SOWs, or as a separate exhibit.
Order of Precedence
A provision specifying which document controls in the event of a conflict between the MSA and an SOW. This is important because SOWs are often negotiated separately and may contain terms that differ from the MSA.
Pricing and Payment Terms
The MSA typically establishes general payment terms, while individual SOWs specify the fees for each engagement.
Amendments and Change Orders
A process for modifying the scope, timeline, or pricing of an SOW after it has been executed.
Clauses Commonly Found in This Contract
Master Services Agreement (term)
The MSA itself is a recognized contract type with its own legal characteristics. Understanding what an MSA is — and how it differs from a standalone services agreement — is foundational to working with this structure.
Statement of Work
Each SOW defines the specific work to be performed under the MSA. Vague or incomplete SOWs are a leading cause of disputes about scope, deliverables, and payment.
Service Level Agreement
Defines the performance standards the provider must meet. SLAs typically include metrics, measurement methods, and remedies for failure to meet the agreed standards.
Indemnification
Allocates responsibility for third-party claims. Service providers typically indemnify customers for IP infringement claims; customers typically indemnify providers for claims arising from customer-provided materials.
Limitation of Liability
Caps the provider's total liability to the customer, often as a multiple of fees paid in a recent period. Exclusions for indemnification obligations and IP infringement are common.
Confidentiality
Protects each party's non-public information exchanged in connection with the services. Particularly important when the provider has access to the customer's proprietary data or systems.
Representations and Warranties
The provider typically warrants that services will be performed in a professional manner and in accordance with the SOW. Customers typically warrant that materials they provide do not infringe third-party rights.
Termination for Convenience
Allows either party to terminate the MSA or an individual SOW without cause, typically on advance notice. The agreement should specify what fees are owed for work completed before termination.
Assignment
Addresses whether either party may assign the MSA or an SOW to a third party, including in connection with a merger or acquisition.
Governing Law
Specifies which state's law governs the agreement and where disputes will be resolved.
What Stewart Law Looks For
- ✓Whether the order of precedence clause clearly specifies which document controls in the event of a conflict between the MSA and an SOW.
- ✓Whether the limitation of liability cap is appropriate for the scope and value of the services being provided.
- ✓Whether the indemnification provisions are balanced and whether IP indemnification obligations are clearly defined.
- ✓Whether the SOW template is sufficiently detailed to define scope, deliverables, acceptance criteria, and payment milestones.
- ✓Whether service level commitments are measurable and whether the remedies for SLA failures are proportionate.
- ✓Whether intellectual property ownership provisions clearly address who owns work product, background IP, and improvements.
- ✓Whether the confidentiality provisions are adequate given the nature of the information being exchanged.
- ✓Whether termination provisions — including termination for cause and termination for convenience — are clearly defined and balanced.
- ✓Whether change management procedures are in place to handle scope changes without creating disputes.
- ✓Whether the agreement addresses data security and privacy obligations, particularly if the provider will have access to customer data.
Areas That May Deserve Closer Attention
- ⚑An order of precedence clause that is ambiguous or that gives the provider's standard terms priority over negotiated MSA terms.
- ⚑A limitation of liability cap that is so low it provides the customer with no meaningful recourse for significant service failures.
- ⚑IP ownership provisions that are vague or that could be read to give the provider ownership of work product created specifically for the customer.
- ⚑SOW templates that lack clear acceptance criteria, making it difficult to determine when a deliverable has been completed.
- ⚑SLA commitments with no meaningful remedies — such as service credits that are capped at a nominal amount.
- ⚑Broad indemnification obligations that expose one party to unlimited liability for third-party claims.
- ⚑Termination for convenience provisions that require long notice periods or that impose significant fees for early termination.
- ⚑Data security provisions that are vague or that do not address the provider's obligations in the event of a data breach.
Party Perspectives
Customer
- •Wants clear SOW templates with defined deliverables, acceptance criteria, and payment milestones.
- •Seeks meaningful SLA commitments with proportionate remedies for failures.
- •Wants ownership of work product created specifically for the customer.
- •Prefers a higher liability cap and broad indemnification from the provider.
- •Wants the ability to terminate for convenience with reasonable notice and without significant fees.
Service Provider
- •Wants a low liability cap — often limited to fees paid in a recent period.
- •Seeks to retain ownership of background IP and tools used across multiple engagements.
- •Prefers broad exclusions from the liability cap for customer-caused issues.
- •Wants clear change management procedures to avoid scope creep without additional compensation.
- •Seeks payment protections, including the right to suspend services for non-payment.
Related Contract University Terms
When to Have an Attorney Review It
MSAs govern the entire commercial relationship between the parties and set the terms that will apply to every project. Because the MSA is negotiated once and then used repeatedly, getting the terms right at the outset is particularly important. Attorney review is especially valuable when the services involve access to sensitive data, significant intellectual property, or high-value deliverables. The SOW template should also be reviewed to ensure it is detailed enough to prevent scope disputes.
Frequently Asked Questions
What is the difference between an MSA and a Statement of Work?
An MSA establishes the legal and commercial framework for the relationship — liability, indemnification, IP, confidentiality, and termination. A Statement of Work defines the specific services, deliverables, timeline, and pricing for a particular project. The MSA governs the SOW; the SOW fills in the project-specific details.
What happens if the MSA and an SOW conflict?
Most MSAs include an order of precedence clause that specifies which document controls in the event of a conflict. Typically, the MSA controls over the SOW on legal and commercial terms, while the SOW controls on project-specific terms. If the order of precedence is unclear, disputes can arise about which terms apply.
Who owns the work product created under an MSA?
IP ownership depends on the agreement. Customers typically want to own work product created specifically for them. Service providers typically want to retain ownership of tools, methodologies, and background IP they bring to the engagement. The MSA should clearly address ownership of work product, background IP, and any improvements to existing IP.
Can an MSA be terminated for a single project without ending the entire relationship?
Yes. Most MSAs allow either party to terminate individual SOWs without terminating the MSA itself. The MSA typically continues in effect until it is separately terminated. The agreement should specify what happens to work in progress and what fees are owed when an individual SOW is terminated.
What is a limitation of liability cap, and how is it typically set in an MSA?
A limitation of liability cap limits the total amount one party can recover from the other for losses under the agreement. In MSAs, the cap is often set as a multiple of fees paid in a recent period — such as fees paid in the prior 12 months. The cap typically excludes certain categories of claims, such as IP indemnification obligations and breaches of confidentiality.
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