A master service agreement, sometimes known as a framework agreement, is a
contract
A contract is a legally enforceable agreement between two or more parties that creates, defines, and governs mutual rights and obligations between them. A contract typically involves the transfer of goods, services, money, or a promise to tran ...
reached between parties, in which the parties agree to most of the terms that will govern future transactions or future agreements.
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 by having a reference point to work out solutions and set specific terms.
Contracts in the information technology, contract research, and similar "open ended" fields are often negotiated as a "Master Service Agreement" and a "
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 ...
".
Purpose
There are two main reasons for using MSA:
# To provide indemnification. It means that one company or party agrees to
indemnify
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 ...
the other party against certain existing losses or any future losses. An indemnifying party is a party that agrees to indemnify any damages that it or any other party has caused or may cause at some point in the future. They engage their own lawyers and bear the legal costs associated with the litigation.
# To allocate risks. This means using sophisticated strategies to identify potential risks and create a strategy to mitigate them.
MSA allows counterparties not to create new agreements for every action between parties because it creates a solid basis for negotiations 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 th ...
s
* Allow for additional adjustments
See also
*
Project management
Project management is the process of leading the work of a team to achieve all project goals within the given constraints. This information is usually described in project documentation, created at the beginning of the development process. Th ...
References
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Industrial agreements
Procurement
Contract law legal terminology