A master service agreement (MSA), sometimes known as a framework agreement, is a

contract A contract is an agreement that specifies certain legally enforceable rights and obligations pertaining to two or more parties. A contract typically involves consent to transfer of goods, services, money, or promise to transfer any of thos ...

reached between

parties A party is a gathering of people who have been invited by a host for the purposes of socializing, conversation, recreation, or as part of a festival or other commemoration or celebration of a special occasion. A party will often feature ...

, in which the parties agree to most of the terms that will govern future transactions or future

agreements Agreement may refer to: Agreements between people and organizations * Gentlemen's agreement, not enforceable by law * Trade agreement, between countries * Consensus (disambiguation), a decision-making process * Contract, enforceable in a court of ...

. A master agreement delineates a schedule of lower-level service agreements, permitting the parties to quickly enact future transactions or agreements, negotiating only the points specific to the new transactions and relying on the provisions in the master agreement for common terms. This master agreement can be used to mediate employer-employee conflict in the

workplace A workplace is a location where someone works, for their employer or themselves, a place of employment. Such a place can range from a home office to a large office building or factory. For industrialized societies, the workplace is one of the ...

by having a reference point to work out solutions and set specific terms. Contracts are often negotiated as a unified master service agreement and

statement of work A statement of work (SOW) is a document routinely employed in the field of project management. It is the narrative description of a project's work requirement. It defines project-specific activities, deliverables and timelines for a vendor providin ...

, such as with

information technology Information technology (IT) is a set of related fields within information and communications technology (ICT), that encompass computer systems, software, programming languages, data processing, data and information processing, and storage. Inf ...

service providers A service provider (SP) is an organization that provides services, such as consulting, legal, real estate, communications, storage, and processing services, to other organizations. Although a service provider can be a sub-unit of the organization t ...

Purpose

There are two main reasons for using MSA: # To provide

indemnification In contract law, an indemnity is a contractual obligation of one party (the ''indemnitor'') to compensate the loss incurred by another party (the ''indemnitee'') due to the relevant acts of the indemnitor or any other party. The duty to indemni ...

. It means that one company or party agrees to indemnify the other party against certain existing losses or any future losses. An indemnifying party is a party that agrees to indemnify any

damages At common law, damages are a remedy in the form of a monetary award to be paid to a claimant as compensation for loss or injury. To warrant the award, the claimant must show that a breach of duty has caused foreseeable loss. To be recognized at ...

that it or any other party has caused or may cause at some point in the future. They engage their own

lawyers A lawyer is a person who is qualified to offer advice about the law, draft legal documents, or represent individuals in legal matters. The exact nature of a lawyer's work varies depending on the legal jurisdiction and the legal system, as wel ...

and bear the

legal costs Court costs (also called law costs in English procedure) are the costs of handling a case, which, depending on legal rules, may or may not include the costs of the various parties in a lawsuit in addition to the costs of the court itself. In the ...

associated with the

litigation A lawsuit is a proceeding by one or more parties (the plaintiff or claimant) against one or more parties (the defendant) in a civil court of law. The archaic term "suit in law" is found in only a small number of laws still in effect today. ...

. # To allocate

risks In simple terms, risk is the possibility of something bad happening. Risk involves uncertainty about the effects/implications of an activity with respect to something that humans value (such as health, well-being, wealth, property or the environ ...

. This means using sophisticated strategies to identify potential risks and create a

strategy Strategy (from Greek στρατηγία ''stratēgia'', "troop leadership; office of general, command, generalship") is a general plan to achieve one or more long-term or overall goals under conditions of uncertainty. In the sense of the " a ...

to mitigate them. MSA allows counterparties not to create new agreements for every action between parties because it creates a solid basis for

negotiations Negotiation is a dialogue between two or more parties to resolve points of difference, gain an advantage for an individual or Collective bargaining, collective, or craft outcomes to satisfy various interests. The parties aspire to agree on m ...

and a reference point. So, the main functions of MSAs are the following: * Outline governing

contractual term A contractual term is "any provision forming part of a contract". Each term gives rise to a contractual obligation, the breach of which may give rise to litigation. Not all terms are stated expressly and some terms carry less legal gravity as ...

s * Allow for additional adjustments

References

{{Reflist Industrial agreements Procurement Contract law legal terminology

Purpose

See also

References