Back to: Introduction to Tech Contracts
You will not live long in technology contracting without coming across a Master Services Agreement (MSA). An MSA is a foundational contract that governs the overall relationship between two parties, usually a supplier and a customer, for the provision of services over time. It establishes the general legal and commercial terms that apply to all future projects or statements of work (SOWs). The MSA is intended to reduce negotiation time for each individual engagement by setting consistent terms in advance. They may be called master procurement agreements (MPA’s) or a variety of other acronyms which start with M and end with A, but they’re all largely the same, other than in the case we briefly touch on below.
They are sometimes called framework agreements, though in public procurement law, framework agreements have very specific rules which don’t apply to normal MSA’s. We won’t cover framework agreements or public procurements here though maybe in some future course as they are increasingly important in the UK and to international companies who hope to deliver into the UK public sector. Thankfully, MSA’s are common to most jurisdictions that we’re concerned with here, so let’s get on with it.
1. Purpose and Structure of an MSA
An MSA defines the core terms and conditions that will apply across multiple projects or transactions. It is often accompanied by statements of work (SOW), work orders, or service schedules that describe the specific deliverables, timelines, and pricing for each project. Think of it as an overarching agreement which governs the overall relationship between the parties, and which is designed to cover off the main legal concerns, so that these do not need to be negotiated every time.
The MSA typically covers legal and risk management provisions such as liability, intellectual property, confidentiality, data protection, warranties, and dispute resolution. By contrast, the statement of work focuses on operational and commercial details (though increasingly, some legal wording is included in SOWs and for good reason, sometimes..)
As you might have already thought of, MSA’s and each statement of work need to be clearly linked and consistent. A clear precedence clause should specify which document prevails if there is a conflict between the MSA and any statement of work and each SOW should reference the MSA. Otherwise, you may not be contracting under the MSA and it could be a flimsy SOW between you and a large dispute.
The production and clarity of how documents related to one another was an issue in Kingsway Hall Hotel Ltd v Red Sky IT (Hounslow) Ltd, where it led to a number of issues. One rather large one was a liability of limitation clause being ineffective, which if you are explaining why your contract suddenly isn’t as ironclad as you thought to your CFO or client, and then they end up being left with a rather large bill for damages, they are unlikely to be happy.
2. Formation and Term
MSAs are often long term agreements designed to support a continuing relationship. They may have an initial fixed term and renewal periods, or they may remain in force until terminated. Termination rights should be carefully drafted to balance flexibility for the customer with certainty for the supplier.
Key issues include:
- The length of the initial term and renewal mechanism
- Termination for convenience and associated notice requirements
- Termination for cause, such as material breach, insolvency, or regulatory failure
- The effect of termination on ongoing statements of work, including whether they continue or automatically end
3. Scope of Services and Statements of Work
The MSA itself should describe the general categories of services that may be provided. Each statement of work should then define the specific scope, deliverables, milestones, and acceptance criteria for a particular project. We will touch on SOWs in more depth in the next lesson, but it felt incomplete not including something here. Who knows, you might not decide to do the next lesson and then what kind of lesson would THIS lesson be?
When drafting or reviewing, you should ensure that:
- The process for developing and approving new statements of work is clearly set out;
- The limits to any SOWs which can be agreed under the MSA;
- Changes to scope, pricing, or timing are managed through a documented change control procedure;
- Acceptance testing and sign off criteria are objective and measurable
Ambiguity in the scope or acceptance process is one of the most common causes of disputes under an MSA.
4. Charges and Payment Terms
The MSA should contain general provisions for pricing models, invoicing, and payment. Individual statements of work will then specify the exact pricing structure.
Key issues include:
- Whether charges are fixed, time and materials based, or milestone based
- The invoicing process, payment timing, and consequences of late payment
- The treatment of expenses and pass through costs
- Rights to withhold or dispute payment and the process for resolving payment disputes
It is also important to check for any clauses that allow unilateral price increases or indexation and to ensure that such mechanisms are transparent and reasonable. Pricing is always one of the trickiest areas to get right, so close collaboration with finance teams and commercial teams are required to ensure you don’t agree to anything too rigid in the MSA which will restrict the use of SOWs going forward. It’s a balancing act.
5. Performance Standards and Service Levels
The MSA may set out general service standards or reference a service level agreement (SLA) defining measurable performance metrics. Where an SLA applies, it should specify the service levels, reporting obligations, remedies for failure, and escalation procedures.
Common issues include:
- Defining service levels that are achievable and measurable
- Ensuring service credits are the sole remedy or are clearly expressed as not limiting other remedies
- Clarifying how repeated service level failures may amount to a material breach
6. Warranties and Representations
The supplier typically warrants that it will perform the services with reasonable care and skill and in accordance with applicable laws. Additional warranties may cover matters such as compliance with industry standards, non infringement of intellectual property rights, and the accuracy of information provided.
Lawyers should ensure that warranties are proportionate to the services and consistent with the supplier’s ability to comply. Overly broad or absolute warranties can expose a supplier to unmanageable risk.
7. Intellectual Property Rights
Ownership and use of intellectual property are central to an MSA, particularly in technology or consulting arrangements.
Common approaches include:
- The customer owns deliverables created specifically for it, while the supplier retains ownership of pre existing materials or tools
- The supplier grants a licence to use background intellectual property to the extent necessary for the customer to use the deliverables
- Each party retains ownership of its pre existing intellectual property
Lawyers should ensure that the drafting clearly distinguishes between background and foreground intellectual property and that any licence terms are consistent with the intended use and duration of the relationship.
8. Confidentiality and Data Protection
Confidentiality clauses in an MSA should apply to both parties and survive termination. The definition of confidential information should be broad but balanced with standard exclusions such as information already known, publicly available, or independently developed.
Where the services involve personal data, data protection clauses must comply with applicable privacy laws. These provisions should address:
- The roles of the parties as controller or processor
- Security measures and audit rights
- Subcontracting and international transfers
- Incident notification obligations
Care should be taken to ensure that data protection terms align with the relevant legal framework, such as the UK GDPR, the EU GDPR, CCPA, or the Australian Privacy Act.
9. Liability and Indemnities
The limitation of liability clause is one of the most negotiated elements of an MSA. It determines the extent to which each party is financially responsible for losses arising under the contract. We will go into more detail separately on this point as it’s literally all some people talk about..
Typical issues include:
- Whether liability is capped at a fixed amount, linked to contract value, or uncapped for specific events
- Categories of loss excluded, such as indirect or consequential loss
- Separate caps for data breaches or intellectual property infringement
- Indemnities for third party claims, such as intellectual property infringement, breach of confidentiality, or data protection breaches
You should assess whether liability caps are commercially appropriate and whether indemnities are too broad or lack control mechanisms such as notice and conduct of claims. Important to think about who has control over what risk, and whether that should be passed to the other party (it depends who you’re acting for as to what answer you get here).
10. Governance and Change Management
MSAs often establish a governance framework to manage performance and resolve operational issues. This may include regular meetings, performance reporting, and escalation procedures.
A clear governance structure helps prevent disputes by ensuring that issues are raised and addressed early. Change control procedures are also essential to manage variations in scope, pricing, or timing. Generally, no changes are effective unless agreed in writing by authorised representatives.
11. Dispute Resolution and Governing Law
The MSA should specify the governing law and jurisdiction or dispute resolution mechanism. Options include litigation, arbitration, or a multi tiered process starting with negotiation or mediation. Typically, this isn’t a problem until the parties are in separate jurisdictions. If that is the case, you can either battle it out, pick a neutral jurisdiction or choose a neutral mediation/arbitration.
12. General Practical Tips
When drafting or reviewing MSAs, you should:
- Ensure clear linkage between the MSA and each statement of work
- Use defined terms consistently throughout the documents
- Avoid conflicting provisions between the MSA and schedules
- Confirm that liability, indemnity, and insurance clauses align with the client’s risk appetite
- Verify that termination and renewal clauses reflect the commercial intent
- Check that intellectual property and data protection clauses are legally compliant and commercially balanced
- Maintain a version control process for amendments and new statements of work
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