Important clauses of the Master Services Agreement

September 17, 2021

Tags: IT Staff Augmentation



When a company and its technology partner start working, of course, the first thing they must sign is an NDA agreement to keep the data confidential. The next step is to establish the legal conditions and regulations that will govern the working relationship. This whole scenario is described in the Master Services Agreement (MSA), the contract that defines how your company and the partner are going to work together and under what conditions.


It is the macro contract, which describes the terms related to intellectual property, payment conditions and economic compensation, the bases of conflict resolution, among other aspects that will guide the working relationship from beginning to end.


Clauses of the MSA that every company should focus on


This MSA is made up of numerous clauses, but if this is the first time you will be working with a technology partner, you should pay special attention to these clauses of the contract:


Software rights


There must be a clause that emphasizes that the client is the owner of the rights of the product that the partner is developing. Your company must have the rights of the platform or software and the partner must reflect this in the contract.




Non Solicitation Agreement


It is one of the most sensitive clauses of the MSA, since both the client and the partner agree not to directly or indirectly hire the employees of both parties. In other words, it may happen that the client is so satisfied with the performance of one of the partner's engineers that they try to hire him directly for his team. None can do this unless they pay compensation for it, which can also be stipulated in the contract.




Already in the NDA the confidentiality of the data that is shared between the client and the partner is agreed, an aspect that is reinforced in the MSA. The protection of privacy is one of the most important points of any work relationship.




Compensation and Billing


Although this type of contract does not talk about the costs of the service provided by the partner, it does establish when payments are made, compensation for delays and what is the procedure to follow when there is any inconvenience in this monetary aspect. This clause will always be negotiable and the most convenient thing is that both the partner and the client are flexible and open in this regard, always trying to reach an agreement and avoid conflicts that damage the employment relationship.


Applicable Law


One of the high points of the MSA is the Applicable Law clause, since it is the one that determines under which laws the contract will be interpreted. It is especially important to consider this clause if, for example, a Canadian company hires a technology partner in Costa Rica. Being in different countries, they must define what will be the law that will govern this contract in case of any legal inconvenience in the future.




Limitation of liability


You must be clear about another of the clauses that every partner is going to include in the contract they draw up: the limitation of liability clause. It means that the partner will limit his responsibility to those elements of software development that he can control. A software product is unstable in nature: for example, a server can go down and interfere with the operation of a website. But that is an external element that is not the responsibility of the partner, therefore, it must be clear that it is not responsible for making any kind of adjustment or compensation.


Alternative dispute resolution


A technology partner must be mature, experienced and flexible enough at all times, especially in complex situations where there are differences with the client. For these cases, the conflict resolution clause is included, which establishes the terms of mediation in the event of a disagreement between the parties.


Before the conflict escalates to a lawsuit or litigation, both the client and the partner must always negotiate, seeking common ground to try to resolve their differences privately.


It is essential that, from the beginning, things are clear between the client and the technology partner to avoid misunderstandings or false expectations that can generate problems in the future. Review these clauses in detail and ensure a good relationship with the partner. Do you have any doubt? Contact us and we will help you in your digital transformation.

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