Master Service Agreement

A Master Service Agreement is a contractual agreement in which two parties, a client and service provider, agree to terms and conditions that are to govern all transactions between them for the long-term. Contracts such as this find use in sectors that involve a large number of transactions between the provider of a service as well as a customer and may include a separate statement of work for each. The IT sector is the most common user of such an agreement.

Inclusions:

Advantages of a Master Service Agreement

Covers Entire Relationship

The Master Service Agreement covers the entire relationship between service provider and customer, covering all aspects of the contract that are likely to arise. Such an agreement is beneficial to have in place before starting a long-term relationship with a vendor/customer.

Saves Time

It provides a framework to quickly negotiate agreements. Therefore, the same terms need not be repetitively negotiated for deals that are very similar to each other.

Process for Master Service Agreement:

Master service agreements

Before contracting for products or services, an oil and gas company will commonly negotiate a master service agreement with the contractor. On its own, the master service agreement does not require a contractor to provide any particular work – or any work at all – to the company, nor does it oblige the company to accept any particular service from the contractor. A contract for the performance of services or provision of goods is created only upon execution of a separate work order. The work order provides the details of the specific service required. The work order is made subject to the terms of the previously negotiated master service agreement, and the work order and agreement, in combination, set out the contractual obligations of the parties.

An agreement will commonly include provisions related to:

• the standard of performance;
• the responsibilities of each party under the contract;
• warranties;
• inspection, acceptance of the goods/services, transfer of title and of care, custody and control;
• confidentiality;
• worksite clean-up, remediation of spills and storage of equipment and chemicals;
• payment terms;
• maintenance of payment records and audit rights;
• indemnities;
• insurance;
• term;
• default and termination; and
• dispute resolution.

While the agreement addresses the parties’ obligations to each other on a relatively broad level, the work order addresses the specifics of a particular job. A typical work order would include:

• a description of the products and/or services to be supplied;
• the location where the products and/or services are to be provided;
• the term of the work order;
• termination provisions;
• rates for products and/or services;
• specifics of the performance; and
• any applicable additional terms.

The work order should state that in the event of any conflict between the terms of the master service agreement and the work order, the terms of the agreement take precedence. If there are any specific, negotiated provisions in the work order that are designed to supplant the agreement’s standard terms, those standard terms must be specifically excepted.

A company should create a form master service agreement that addresses the company’s specific needs and contracting philosophy. The goal of creating the agreement is to manage the risks and liabilities that the company will assume contractually. While the indemnities and insurance provisions are the linchpins of the protection provided by an agreement, warranties, clean-up obligations, acceptance and termination terms are important provisions that can also affect the company’s bottom line.