Corporate Services Agreement: Everything You Need to Know
A corporate services agreement is a contract between two businesses or individuals that lays out the terms and expectations of the service relationship.3 min read
A corporate services agreement is a contract between two businesses or individuals that lays out the terms and expectations of the service relationship. This type of document should be used whenever you are providing services to a customer or client and whenever you are the buyer or recipient of services from another entity.
A corporate services agreement is similar to but more important than purchase orders, service level agreements, and purchasing agreements among others.
Master Service Agreement
This type of service agreement outlines what each party is expected to do and which services apply. When you use a Master Service Agreement (MSA), you can speed up the process of developing contracts because you don't have to start over from scratch each time. You may also see an MSA referred to as a service level agreement (SLA).
An MSA reduces the time it takes to negotiate a contract. The parties can focus on the critical elements of the deal, like price and timelines, and then get on with the work. Once you've worked through the completion of your initial MSA, you will know more about what problems to expect in the future. When you draft the next MSA, you can use that knowledge to make improvements. Without an MSA, the parties can still sort through issues that arise, but contracts break down more easily.
An MSA is also useful in long-term agreements. Businesses with relationships that are ongoing over time can use an MSA to avoid renegotiating every time the customer places a new order. The work can go ahead, saving time and money.
MSA templates or cut and paste documents are available and widely used, especially by small businesses. These tools have significant benefits.
- Having an MSA ready allows a business to take advantage of an opportunity that requires quick action.
- A company can eliminate many of the issues that arise from poorly written contracts, avoiding lawsuits and lesser disputes.
- The conditions of doing business are always changing, so it's helpful for a company to be able to change the MSA it uses as often as necessary.
Provisions of an MSA or SLA
Common provisions of an MSA or SLA are:
- Confidentiality: The parties agree not to share each other's proprietary information with anyone else.
- Delivery terms: What is to be delivered, when, and by whom?
- Dispute resolution processes: If a dispute does arise from the business relationship, the SLA describes the options for resolving it.
- Geography: Where will the services be performed?
- Intellectual property: If patents or another type of intellectual property (IP) emerges from the relationship, the MSA allows parties to agree on who will own and manage it. Usually, the client keeps the IP rights, but sometimes a vendor will retain the patent or IP and give the buyer perpetual rights.
- Liability and Indemnification: The MSA identifies who is responsible for what if the parties are sued as a result of the transactions. One party doesn't have to take responsibility, financial or otherwise, for the mistakes of the other. Sometimes, however, one party does agree to take on responsibility for errors made by other parties. One party may agree to pay any legal fees that arise or they may agree not to sue each other.
- Risk allocation: When parties enter into an MSA, it may affect contracts they have put in place in the past. This comes up often with insurance agreements. The MSA describes what risks each party assumes at each part of the project. If a dispute does arise, the MSA identifies the responsible party quickly.
- Payment: The document includes the preliminary estimates of how much the customer will pay and on what schedule.
- Venue: The agreement names the court where any legal proceedings will take place, such as a particular state or federal venue or through arbitration.
- Warranties: What is covered and for how long?
- Quality standards: The MSA sets out what will be an acceptable level of quality. This is a common area of conflict.
- Other areas that are sometimes included in an SLA are ethical standards, access to property or networks, and any social expectations.
Parties want to be as detailed as possible without becoming overly restrictive while saving resources spent on negotiations.
If you need help with developing a corporate services agreement, you can post your legal need on UpCounsel's marketplace. UpCounsel accepts only the top 5 percent of lawyers to its site. Lawyers on UpCounsel come from law schools such as Harvard Law and Yale Law and average 14 years of legal experience, including work with or on behalf of companies like Google, Stripe, and Twilio.