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Why do Parties Prefer to have a Master Services Agreement


Why do Parties Prefer to have a Master Services Agreement

Importance of Master Services Agreement

Master Services Agreement ( MSA) is the primary agreement between the parties which basically contains important and general provisions that will govern the relationship of the parties such as confidentiality, limitation of liability, indemnity, intellectual property clause, non solicitation.  The foregoing clauses are being negotiated by the parties in the MSA so that the same will no longer be reiterated in their subsequent agreements.


Benefits of the Master Services Agreement

There are many reasons why parties prefer to enter into Master Services Agreement.

1. Provides for the basic covenant between the parties. The Master Services Agreement serves as a basic agreement containing all genetic terms and condition between the parties.

2. Easier to Negotiate Subsequent Contracts.  It is easier for the parties to negotiate and execute their subsequent covenants which is very important especially in the IT and service industry where time is always of the essence and delay in the contracting process may result to loss of profits.

3. It saves time.  It avoids the time and expense of negotiating every time a new contract is entered into between the parties.


What is the Statement of Work?

Parties who have MSA in place usually execute Statements of Work (SOW) to cover their subsequent arrangements. The SOWs need not cover the important clauses that have  already been tackled in the MSA. It will only concentrate on the scope of services, the agreed service level agreement and the negotiated fees. All SOWs usually contain a general statement that with the exception of the issues tackled in the SOW, all clauses in the MSA shall remain in full force and effect.

Therefore, it is very important for a contracting party to determine and assert their rights in the MSA since in the event of dispute, the courts will primarily refer to the language of the MSA.






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