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February 16, 2023
The sales process can be convoluted and complex, from cold calls to NDAs to sealing the deal. Any well-oiled sales team will tell you – it’s crucial to streamline the process: handle objections, scale obstacles and create a process oozing with efficiency. This is exactly where an MSA or “master service agreement” (also known as a “framework services agreement”) can help. This contract works by the parties negotiating all or most of the terms up-front for a defined set of available services, some or all of which may be purchased by the customer on one or more occasions down the line. Typically, each time the customer wishes to purchase those services, it signs off a statement of work (SOW) with the supplier. A template of this document is also usually agreed upfront and included in a schedule to the main contract terms. Each SOW usually sets out the specific services to be provided and any deliverables, the fees and any applicable acceptance criteria, milestones, service levels and/or equipment to be used and key personnel on both sides. The supplier then provides those specified services in accordance with the MSA’s main terms.
But when should an MSA be used? And what are some of the benefits of MSAs for sales teams?
In this article, we look at master services agreements, from what they mean for the sales process, to the main risks and disadvantages of not having one in place.
Throughout the sales lifecycle, you’ll develop B2B relationships that go beyond a one-time deal. However, does that mean you need to negotiate terms every time a new transaction rears its head? Fortunately, no. A master services agreement defines the terms under which services are to be provided in an ongoing relationship.
As an agreement set to impact the long term, it’s usually drafted with flexibility and adaptability in mind. Handy.
Master service agreements have a host of benefits, making them particularly popular with sales teams seeking to streamline their process. Let’s explore the highlights.
Firstly, MSAs can save time and money in the long run. By defining most of the terms that will govern a future relationship, these agreements typically save sales teams from having to re-enter negotiations over terms agreed at the outset. In addition, MSAs typically contain specific wording to effectively change a SOW.
By their very nature, MSAs can make customers and suppliers focus on their future, longer-term contractual relationships. Businesses are ultimately people, and parties working together up-front to negotiate MSAs can help foster good working business relationships from the outset and, with the help of great lawyers, generate key contracts which are fair and balanced to both businesses with a reasonable allocation of risks.
Disputes are the last thing anyone wants in a business relationship, and yet, they invariably arise. By defining the terms of the relationship early on and including dispute provisions, master services agreements can help to set expectations and responsibilities between both parties, helping to minimise the chance of future disputes in the process and to manage them if they do arise.
Well-drafted master services agreements can equip each party with legal protections and help appropriately allocate risk between them. This will usually take the form of accurately defining the relevant available services and drafting appropriate obligations for each party, limitations and exclusions of liability and confidentiality terms that protect the best interests of each business. By ironing these terms out in the early stages, you not only limit and allocate risk but also help to protect your business legally.
Master services agreements are designed to be flexible and adaptable to allow for future projects. However, they can provide a useful framework - or baseline - for future deals. In doing so, they can help speed up and support future negotiations, with a springboard of agreed terms to work from. Nifty.
While no two master services agreements are the same, they will share a few core components. Aside from ensuring your MSA is bespoke to your business, what should it include?
To start, your MSA will (amongst other things) likely need to cover the following basics:
Beyond this, you’ll likely want to think about…
As a provider of specific services (potentially by specific deadlines) suppliers are generally at a greater risk of breaching the contract and so being sued under the MSA. With that in mind, suppliers will want to ensure that the MSA appropriately limits and excludes their liability where possible and to the extent the law allows. If the MSA is on a supplier’s standard terms (i.e. one it habitually uses with lots of customers with minimal/no negotiation) in a dispute the supplier would have to prove that any limitation and exclusion clauses on which it intended to rely meet a statutory reasonableness test. One thing, however, is clear; not including such a clause means only the law limits the amount of damages recoverable through a successful claim. Pretty important stuff.
TUPE provides protection for employees when the business they’re employed by changes ownership, or there is a change in service provider in relation to activities they’ve been carrying out.
In the context of MSAs, TUPE should be considered at the beginning and the end of the contract.
At the beginning, if a customer’s employees involved in supplying the relevant services transfer to the supplier (i.e. the customer is essentially outsourcing the relevant services) a supplier may want to seek contractual protection through appropriate warranties and indemnities from the customer. At the end, those employees may transfer back to the customer (or to a new supplier), and the customer may seek appropriate contractual protection again through warranties and indemnities. It’s worth noting however, these TUPE provisions are only relevant if employees are expected to transfer, and many MSAs will opt to avoid including this provision.
Ah, you knew data protection was going to come up at one point or another. It’ll need to be determined at the outset if the supplier is processing any personal data (whether or not on the customer’s behalf) when providing the relevant services. With that in mind, both parties will need to be compliant with the UK GDPR, and if relevant - the EU GDPR.
If personal data is being processed, then depending on the relationship between supplier and customer and their locations, the MSA will need to contain certain wording and may need to be supplemented by additional documents including for example the UK International Data Transfer Agreement or separate Addendum to the EU Standard Contractual Clauses.
Intellectual property rights are big business, and it’s important each party ring fences its rights where appropriate. Your MSA should include information on what intellectual property rights each party retains ownership over and contain appropriate licenses to and from each party to the supplier providing the relevant services.
Depending on the nature of a supplier’s work, it may be delivered by a particularly valuable individual or team. While it’s the last thing suppliers want to think of, sometimes a customer attempts to “cut out the middleman” by offering employment to a supplier’s team directly. It helps in this instance to have a “non-solicitation clause” that ensures the customer agrees not to poach staff, and if they do - serious repercussions can follow suit. Non-solicitation clauses are considered to be a ’restraint on trade’ which in this context means that to be enforceable they must go no further than necessary to protect a supplier’s legitimate business interests. So, engaging with a lawyer to draft an appropriate non-solicitation clause is key!
As you can see there are a lot of benefits to using an MSA. And, without one, you can face a lot of hurdles.
For sales teams the main risks are inadvertently agreeing to unfavourable terms on a supplier’s behalf and contracting with customers on different key terms, and the main disadvantages are the potential loss of valuable time and money, slower run times from customer enquiry to sign off and more distant relationships with customers which don’t help future sales or provide a friendly platform for discussion if and when things, unfortunately, don’t quite go as planned.
Think you’re in need of an MSA or need help negotiating? Or wondering whether your existing services agreements truly benefit and protect your business?
Contact us now for a free, no-obligation discovery call.
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