Master your MSA: 6 Essential Clauses You CANNOT Afford to Miss!

Summary

This video explains the importance of having a Master Service Agreement (MSA) for small businesses, especially for Managed Service Providers (MSPs). The MSA defines the working relationship with clients, setting expectations and reducing potential legal risks. The video outlines six key clauses every MSA should include: limitation of liability, termination, prevailing party, scope of services, non-solicitation, and assignment. The speaker emphasizes the need for professional legal advice when drafting MSAs and the benefits of hiring MSP-specific attorneys. Ultimately, having a well-structured MSA helps businesses avoid lawsuits and sleep better at night.

Takeaways

• 📝 Your MSA (Master Service Agreement) is a core contract that defines the working relationship between you and your client, especially important for MSPs (Managed Service Providers).
• ⚖️ Limitations of liability clauses are crucial in an MSA to avoid unlimited liabilities; they should align with the contract size and your insurance coverage.
• 🚫 Termination clauses ensure that the MSA cannot be canceled while other active contracts (e.g., statements of work) are still in place.
• ⚖️ A prevailing party clause ensures the losing party in a lawsuit covers the legal fees of the winner, helping to deter nuisance lawsuits.
• 🛠️ The scope of services clause protects against doing work outside of what's agreed upon in writing, such as critical services like MFA.
• 🚫 A non-solicitation clause prevents clients from hiring your employees and vice versa without financial penalties, ensuring protection for both parties.
• 📜 An assignment clause allows you to transfer your contracts to a third party in case of a business sale, making transitions smoother.
• ⚠️ While you can create an MSA yourself, hiring an attorney is advised to avoid costly mistakes, especially when dealing with lawsuits.
• 🔍 An MSP-specific attorney understands the nuances of the industry and can better ensure that the MSA addresses industry-specific risks.
• 🛡️ Most MSPs don’t get sued, but those who lack proper contracts are more vulnerable to lawsuits, making a well-structured MSA vital for business protection.

Q & A

What is an MSA (Master Service Agreement) and why is it important for MSPs?

An MSA, or Master Service Agreement, is a contract that defines the working relationship between a business and its client. It sets standard guidelines and expectations on how they will conduct business together. For MSPs (Managed Service Providers), having an MSA is crucial because it helps protect against potential legal challenges and ensures that both parties are on the same page regarding services and responsibilities.

What is the purpose of having separate attachments or statements of work (SOW) apart from the MSA?

The MSA outlines the general terms of the business relationship, but specific services and tasks are typically detailed in separate attachments or statements of work (SOW). This modular approach keeps the MSA focused and manageable, while the specific services, project details, and responsibilities are documented separately to avoid creating a complex and lengthy contract.

What is the significance of the limitation of liability clause in an MSA?

The limitation of liability clause is important because it sets a cap on the potential damages a client can claim in a lawsuit. Without this clause, the liability could be unlimited, putting the business at significant risk. The limit should be reasonable and often corresponds to the size of the contract or the insurance coverage the business holds.

Why is the termination clause necessary in an MSA?

The termination clause ensures that the MSA remains in effect while any other related contracts, such as statements of work, are still active. This prevents clients from canceling the MSA while other projects or services are ongoing, ensuring legal protection for both parties.

How does the prevailing party clause help prevent nuisance lawsuits?

The prevailing party clause states that the party who wins a lawsuit can have their legal fees covered by the losing party. This discourages clients from filing nuisance lawsuits, as they would risk being responsible for the other party's legal costs if they lose.

What is the scope of services clause, and why is it crucial in an MSA?

The scope of services clause ensures that the MSP is only obligated to provide services that have been agreed to in writing. This protects the MSP from being expected to perform tasks or services outside the agreed-upon terms, such as implementing additional security measures like MFA without proper agreement.

What is the purpose of a non-solicitation clause in an MSA?

The non-solicitation clause prevents the client from hiring the MSP’s employees, and vice versa, unless there is an agreement in writing. This protects both parties from losing valuable staff to each other and ensures compensation if an employee is hired away, often through a fee or penalty.

What does the assignment clause in an MSA cover?

The assignment clause allows the MSP to transfer the MSA to another party in case the business is sold. This ensures that the acquiring company can continue the contractual relationship with the client without renegotiating all contracts, making transitions smoother in mergers or acquisitions.

Can an MSP draft its own MSA without legal help?

While an MSP can technically draft its own MSA, it is highly recommended to hire an attorney, especially one familiar with the MSP industry. Contracts contain many legal nuances, and attempting to piece together an MSA from various sources may result in legal vulnerabilities, particularly in cases of disputes or lawsuits.

Why is it beneficial to hire an MSP-specific attorney to draft an MSA?

An MSP-specific attorney understands the intricacies of the managed service industry and the relevant legal precedents. They can draft a more tailored MSA that addresses common challenges faced by MSPs, ensuring better protection and compliance with industry standards.