In today’s technology-driven business environment, organizations frequently engage software developers, IT consultants, cybersecurity vendors, and other technology service providers. A well-drafted Master Services Agreement (MSA) establishes the foundation for a successful, long-term business relationship by clearly defining each party’s rights, obligations, and risk allocation.
Whether your business is providing or purchasing technology services, the following terms and conditions are essential to include in a comprehensive and legally sound MSA:
Scope of Services
The MSA should clearly outline:
- The general types of services to be provided (e.g., software development, managed IT services, cybersecurity, technical support).
- A requirement for Statements of Work (SOWs) or project-specific agreements that define detailed deliverables, timelines, and pricing for each project under the MSA.
Term and Termination
Clearly state:
- The effective date and duration of the MSA (e.g., one year, automatically renewing, or project-based).
- Termination rights for both parties, including:
- Termination for convenience (if applicable).
- Termination for cause (e.g., material breach, failure to meet service levels).
- Termination due to insolvency or force majeure events.
- Obligations upon termination, such as return of property or data.
Payment Terms
The MSA should address:
- Payment structure (fixed fee, time and materials, milestone payments, retainer, etc.).
- Invoicing procedures and payment due dates.
- Late payment penalties or interest.
- Responsibility for taxes or other applicable fees.
Intellectual Property Rights
Clearly define ownership of intellectual property:
- Pre-Existing IP: Each party retains ownership of any intellectual property they bring to the project.
- Developed IP: Specify whether the client or service provider owns any new technology, software, or deliverables created during the engagement.
- Licensing terms for the use of software, tools, or other proprietary materials should also be included.
Confidentiality and Data Security
The MSA must contain:
- Mutual confidentiality obligations to protect proprietary or sensitive information.
- Data protection requirements, especially if the services involve handling personal or confidential client data.
- Compliance with applicable data privacy laws (e.g., GDPR, CCPA, HIPAA).
- Cybersecurity standards and protocols to be followed.
Warranties and Service Levels
To manage expectations and reduce disputes, include:
- Performance warranties that services will be provided in a professional and workmanlike manner.
- Product or software warranties, if applicable.
- Service Level Agreements (SLAs) detailing expected uptime, response times, and remedies for service interruptions or failures.
Indemnification
The agreement should specify:
- The service provider’s obligation to indemnify the client for:
- Third-party claims arising from IP infringement.
- Bodily injury or property damage caused by the service provider.
- Breach of confidentiality or data security obligations.
- Whether mutual indemnification applies in certain circumstances.
Limitation of Liability
Include provisions to limit exposure to damages:
- Cap on direct damages (e.g., total fees paid under the agreement).
- Exclusion of consequential, incidental, or punitive damages.
- Exceptions for gross negligence, willful misconduct, or breach of confidentiality.
Dispute Resolution
Establish how disputes will be resolved:
- Negotiation period to attempt informal resolution.
- Mediation or arbitration requirements, if applicable.
- Venue, jurisdiction, and governing law for legal proceedings.
Insurance Requirements
Specify minimum insurance coverage that the service provider must maintain, such as:
- Commercial General Liability
- Professional Liability (Errors & Omissions)
- Cybersecurity/Data Breach Insurance
- Workers’ Compensation
Compliance with Laws
Both parties should agree to:
- Comply with all applicable laws, regulations, and industry standards.
- Ensure software or technology services do not violate export control or other legal restrictions.
Force Majeure
Address unexpected events such as:
- Natural disasters, pandemics, or other uncontrollable events.
- Temporary suspension of obligations without penalty if performance is prevented by a force majeure event.
Relationship of the Parties
Clarify that:
- The service provider is an independent contractor, not an employee, partner, or agent of the client.
- Neither party has authority to bind the other in contracts or obligations.
Entire Agreement and Amendments
Include standard provisions confirming:
- The MSA constitutes the entire agreement between the parties.
- Any amendments or modifications must be in writing and signed by both parties.
Conclusion
A Technology Master Services Agreement serves as the legal backbone of an ongoing service relationship. By addressing these key terms and conditions, businesses can minimize risks, protect valuable assets, and promote smooth collaboration with technology service providers.
If you are considering entering into a Technology MSA or need assistance reviewing or negotiating an agreement, the attorneys at Oberman Law Firm are here to help.
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Oberman Law Firm represents clients in a wide range of practice areas, including private equity, M&A, healthcare, corporate transactions, intellectual property, data privacy and security, regulatory compliance and governance, cross-border transactions, labor and employment, construction law, litigation, private clients’ services, corporate restructuring, and white-collar and governmental disputes.
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