A Master Services Agreement (MSA) is a vital contract that establishes the terms and conditions between a technology business and its customers. It outlines the legal rights, responsibilities, and obligations of both parties throughout the duration of their business relationship.
To ensure a clear understanding, it is crucial to grasp key legal terms included in an Master Services Agreement. Here are the key legal terms you’ll need to include:
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Term of the Contract
The "term" refers to the duration of the MSA, indicating whether it will auto-renew or expire at a certain date.
This clause specifies the initial length of the agreement and the conditions for extension or termination. It is essential to understand these provisions to avoid any unexpected consequences or obligations.
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Parties' responsibilities
This section outlines the obligations and responsibilities of each party involved in the agreement. It defines the scope of work, services to be provided, and the standards of performance expected from both parties.
Agreeing these responsibilities up front helps to establish clear expectations and should minimize potential conflicts.
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Acceptance Testing
Applicable to professional services only
Acceptance testing provisions ensure that the delivered services/deliverables meet the requirements that have been agreed.
This section defines the acceptance criteria, testing procedures, and the customer's rights to accept or reject deliverables, and what happens if the client fails to ‘accept’ the deliverables within the agreed timeframe’. Understanding this provision ensures a transparent evaluation process.
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Charges and Payment Terms
This clause includes details such as pricing, invoicing frequency, payment methods, and any applicable late payment penalties.
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Change Order
The change order process outlines how changes or modifications to the original agreement will be handled.
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How can you request a change?
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Who will approving it?
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How will changes impact pricing, timelines, or other contractual terms?
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Warranties
The warranties clause is the assurance from the business about the quality, performance, or functionality of the services or products delivered.
It defines the remedies available to the client if these warranties are breached
Knowing the warranties provided can help assess the risk associated with the services.
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Liabilities
This section outlines the extent of each party’s liability to the other in case of breaches, errors, or damages.
It helps protect both parties’ financial position for any potential losses or claims arising from the agreement.
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Intellectual Property Rights
The Intellectual Property Rights (IPR) clause defines the ownership, use, and protection of intellectual property created or used during the provision of services.
It specifies the ownership rights and any licensing or usage restrictions.
IPR Indemnity
Additionally, the IPR indemnities provision addresses the obligations of the tech business to indemnify the client against any third-party claims related to infringement of intellectual property rights.
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Termination
The termination clause outlines the conditions under which either party may end the agreement before its natural expiration.
It defines the notice period, termination rights, and any associated consequences or obligations.
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Non-Solicitation
The non-solicitation clause is there to stop your customer from recruiting your employees or contractors during and after the agreement.
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Governing Law and Jurisdiction
This section clarifies the legal framework that governs the agreement and identifies the appropriate forum for dispute resolution.
Master Services Agreements are crucial for a successful business relationship. Agreeing these elements before you start to work together helps both parties to navigate the relationship with clarity and confidence.