Master Services Agreements: love ‘em? hate ‘em? The intent of an MSA is a good thing as it helps foster a more strategic relationship by typically creating a contracting vehicle where additional work can be flexibly added. In short, it sets out the legal “rules” of the relationship.
However (and unfortunately) all too often the road to hell is paved with good intentions. My friend and colleague David Frydlinger (Partner at Lindahl Law Firm in Sweden) says
Why? MSAs have evolved into heavy-handed and one-sided contracts that companies can too easily use to leverage their dominance over contracting relationships.
Let’s back up for a moment. MSAs are defined as legally binding contracts involving two or more parties; they are usually service-oriented and go into some detail about contract components and mechanisms. They are often viewed as ways to make the contracting process more efficient by not having to negotiate certain terms over and over again for each new contract or contract renewal. Because the parties intend to enter future agreements with one another, they codify the “nuts and bolts” provisions that will govern future agreements in one place—the MSA. Thus they can have a streamlining effect by freeing the parties to negotiate deal-specific terms.
In theory that makes sense and there are probably many MSAs that operate well. The problem emerges when an MSA becomes anchored in cement, is outdated and/or has provisions designed to favor or protect one side over another. The opposite of efficiency can occur and collaboration can become difficult, or non-existent.
Old Ts and Cs can die hard, especially with MSAs. So is it to foster a good business relationship?
Image: Change in Terms by Michael Simmons via Flickr CC