For businesses that work together over time, renegotiating contracts for every new project can be slow, costly, and frustrating. A Master Service Agreement or MSA is a practical solution that allows two businesses to establish clear, long-term terms for their working relationship. For UK startups and SMEs, an MSA can streamline partnerships, reduce admin and protect your interests from day one.
In this blog, we explain what an MSA is, how it works in practice and why it is useful – in general terms. For drafting an MSA tailored to your situation, it is best to get professional legal advice.
What is a Master Service Agreement?
An MSA is a framework contract between two businesses, typically a supplier and a customer, that covers the ‘big picture’ terms for their relationship. Instead of starting from scratch for each new project, the MSA sets out the core legal rights and obligations for all work carried out under the agreement.
Once an MSA is in place, future projects do not require a brand-new contract. Core terms such as payment, intellectual property ownership, confidentiality and liability are already agreed, saving time and avoiding repeated negotiations.
This approach is particularly valuable when:
- you expect to work together on multiple projects over months or years
- the services are repeatable or related
- you want consistent contract terms across all projects
How a Master Service Agreement works in practice
An MSA usually works hand-in-hand with Statements of Work (SOWs). Think of the MSA as the ‘master framework’ and SOWs as project-specific add-ons.
Here is how it typically works: first, the parties negotiate and sign the MSA, agreeing on general provisions like confidentiality, payment terms, liability limits, etc. Then, when a new project arises, they prepare a short SOW outlining the deliverables, timelines, prices, and other project-specific terms. Because the MSA’s terms automatically apply, there is no need to renegotiate the legal boilerplate for each project.
Example:
A tech startup signs an MSA with an IT support provider. Each time the startup needs work - whether it’s a hardware upgrade or a new software rollout - they agree a short SOW for that job. The SOW inherits the MSA’s rules, so both sides know the ground rules without repeating the same negotiations. This saves time, cuts legal costs, and reduces the risk of misunderstandings.
Do you always need an MSA? Not necessarily. For one-off or short engagements, a simple standalone contract may be enough. But if you expect an ongoing relationship or multiple projects over time, for example, with a marketing agency for various campaigns, an MSA is highly beneficial.
Key benefits of a Master Service Agreement
- saves time and money by avoiding repeated negotiations
- speeds up future deals and reduces administrative work
- reduces disputes because expectations are clear from the outset
- protects both parties with agreed rules on liability, confidentiality or intellectual property
- builds stronger relationships by providing a stable legal foundation
Keep in mind that drafting a comprehensive MSA can be time-consuming initially. It requires thinking through various ‘what if’ scenarios and negotiating terms that both parties can live with. Reaching a balanced agreement may involve extensive discussions. However, for many businesses, this upfront effort is worth it. Once the MSA is signed, it provides peace of mind and a stable platform for all your future dealings with that partner.
Common elements of a Master Service Agreement
Although every MSA is tailored to the parties’ needs, most MSAs will cover a similar set of key areas:
1. Parties and scope of services
The MSA will identify the parties and clearly define the scope of services covered. It should spell out what services will be provided. The agreement may note that detailed descriptions for each project will be provided in individual SOWs, but the MSA sets overall parameters of the work.
2. Terms and termination
The MSAs usually state how long the agreement lasts and any renewal provisions, as well as how either party can terminate the agreement early. For example, the MSA might run for one year with automatic renewal or continue indefinitely until notice is given. The MSA should also outline what happens when the agreement or a project ends (e.g. how final payments are settled and how confidential information or materials are returned) to ensure a clean break if the contract concludes.
It is also important to keep in mind what may happen to any underlying SOWs, if the MSA is terminated. For example, it usually makes commercial sense that the parties go on to complete any outstanding SOWs even if one party gives notice to terminate the MSA.
3. Pricing and payment terms
The agreement will also set out how the supplier will be paid for their services. This includes the fees or rates, invoicing process, and payment schedule. For instance, it may specify whether work is billed at a fixed price, hourly rates, or per deliverable, as well as when invoices are issued and when payments are due. Clear payment terms are critical to avoid disputes.
4. Performance standards
MSAs often include expectations about how the services will be performed. This can mean requiring the supplier to carry out services with reasonable care and skill or meeting certain service levels. In more technical agreements, there may be key performance indicators (KPIs) or services level agreements (SLAs) defined to measure performance. Setting these benchmarks helps hold the service provider accountable and gives the customer recourse (like service credits or remedies) if standards aren’t met.
5. Intellectual property rights
It is important to decide who will own any intellectual property (IP) created during the business relationship. For example, if a software developer is writing code or a design agency is creating branding for you, the MSA should state whether those IP rights will belong to the client or remain with the service provider. Generally, without an express clause, the default law might leave new IP with the creator, so businesses often use the MSA to ensure they obtain ownership or a proper license to use the deliverables. Clarifying IP ownership upfront prevents confusion and future legal battles over who owns what.
6. Confidentiality
In any close business partnership, sensitive information is likely to be shared. MSAs almost always include a confidentiality clause requiring each party to keep the other’s non-public information secret. This covers things like trade secrets, customer data, business plans or any information designated as confidential. The clause typically restricts how that information can be used and for how long the confidentiality obligations last (often after the MSA expires). Strong confidentiality terms protect both the client’s and the supplier’s business interests.
7. Liability and indemnification
A key function of an MSA is to allocate risk between the parties. The contract will limit each party’s liability to avoid unlimited exposure to damages. This is usually done by capping the total amount one party can claim from the other and by excluding certain types of damages (like indirect or consequential losses). Such limitations have to be reasonable under UK law, but they are common in B2B agreements. The MSA may also include indemnities – promises to compensate the other party for specific losses.
For instance, a supplier might indemnify the client against third-party IP infringement claims, or a client might indemnify the supplier for losses from the client’s misuse of the service. It’s important these indemnity clauses are not too broad – you don’t want to unwittingly accept open-ended liability for issues you can’t control.
8. Data protection and regulatory compliance
In today’s environment, legal compliance is a big part of commercial agreements. If the service involves personal data (for example, a marketing agency using employee personal data to create marketing material), the MSA should include data protection clauses to ensure compliance with the UK GDPR and Data Protection Act 2018.
For example, where a supplier is a data processor, certain contractual clauses set out under the UK GDPR are a requirement to include – you can read more about these clauses here. Otherwise, the customer and the supplier could be joint controllers, which requires a separate set of clauses. Customers and suppliers that are independent controllers may also need to consider whether compliance with the Data Sharing Code of Practice is desirable.
Aside from data privacy, many MSAs also oblige each party to comply with all applicable laws and regulations – this can encompass anti-bribery laws (Bribery Act 2010), modern slavery legislation, tax evasion prevention, and any industry-specific regulations. Including such compliance commitments in the MSA helps ensure both parties uphold ethical and legal standards throughout the relationship.
9. Priority of SOWs
In most cases, the terms of the MSA will take priority over any terms in a SOW. This is to ensure that as projects are being developed certain clauses that go against what might be in the MSA are not in conflict – that conflict could lead to legal ambiguity or otherwise go against what the parties originally agreed.
However, this may not always work. For example, if the IP ownership position for one SOW needs to be different than the terms in the MSA, both customers and suppliers need to be aware of whether the terms they set out in an MSA are actually contractually effective. In such circumstances, an amendment to the MSA might be required.
Note: The above list is not exhaustive. MSAs can cover many other areas depending on the nature of the business. For instance, if employees might be transferred when changing service providers, an MSA might address employee transfer (TUPE) considerations or if one party is subcontracting, there may be provisions about subcontractor approval.
Conclusion
A well-drafted Master Service Agreement is a powerful tool for building efficient, long-term business relationships. By agreeing the core terms early, it lets both sides focus on delivering value rather than constantly renegotiating contracts. For startups and SMEs in particular, an MSA can provide much-needed stability, reduce legal risk, and help establish trust with key partners.
That said, crafting a good MSA requires careful thought. It’s a detailed document and can be complex to draft. You need to balance interests (since both supplier and customer must find it acceptable) and anticipate future scenarios. If important terms are overlooked or unclear, the whole point of the MSA (avoiding disputes and saving time) could be undermined. Thus, while it’s possible to find templates or general guidance, it is often best to get professional help to tailor the agreement to your needs. A well-negotiated MSA will pay off by saving you headaches later, but a poorly drafted one could leave dangerous gaps.
Get in touch
If you are considering an MSA or need one drafted for your business, we can help. At EM Law, we have extensive experience in preparing MSAs. Our team is here to support you in getting your legal foundations right, so you can focus on growing your business with confidence. Reach out to us to discuss how we can assist with your Master Service Agreement.
