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Key Clauses in a Master Service Agreement (MSA): What to Watch Out For Before you sign a Master...
5 Costly Mistakes in a Master Service Agreement Contract (and How to Avoid Them)
Master Service Agreement Contracts (MSAs) set the reusable rules for working with clients. Each project then runs under its own Statement of Work (SOW). To understand the structure, key clauses, and checklist items every MSA should include, see our Master Service Agreement Guide.
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MSA vs. SOW (30-Second Primer)
An MSA is the foundation: payment terms, IP rights, confidentiality, liability, dispute resolution. A SOW is a specific room you add later: scope, deliverables, deadlines, and acceptance steps—issued “under” and governed by the MSA.
Mistake #1: Treating the SOW as an Afterthought
Real-world moment: You hire a developer for a “landing page.” You assume mobile, page speed, and GA4 are included. They deliver a desktop mock and call the rest “out of scope.” Scope creep starts; margins vanish.
Fix: For every project, issue a separate SOW that references your MSA and spells out deliverables, exclusions, milestones, acceptance criteria, revision limits, and a simple change-order process.
SOW Snapshot (copy/paste)
• Deliverables: 1 responsive landing page (desktop/tablet/mobile), 1 hero, 3 sections, contact form
• Performance: Lighthouse ≥ 85 mobile; image optimization; basic caching
• Integrations: GA4 pageview + form submit event
• Revisions: Up to 2 rounds (minor); major changes via Change Order
• Timeline: Draft by 10/20; final by 10/27 with 2-day client review
• Acceptance: Written approval after UAT checklist
• Out of Scope: A/B tests, custom dashboards, copywriting
• Reference: “This SOW is issued under—and governed by—the MSA dated [Month Day, Year].”
• Deliverables: 1 responsive landing page (desktop/tablet/mobile), 1 hero, 3 sections, contact form
• Performance: Lighthouse ≥ 85 mobile; image optimization; basic caching
• Integrations: GA4 pageview + form submit event
• Revisions: Up to 2 rounds (minor); major changes via Change Order
• Timeline: Draft by 10/20; final by 10/27 with 2-day client review
• Acceptance: Written approval after UAT checklist
• Out of Scope: A/B tests, custom dashboards, copywriting
• Reference: “This SOW is issued under—and governed by—the MSA dated [Month Day, Year].”
Mistake #2: Not Writing Down Who Owns the Work
⚠️ Common pitfall: Paying the invoice does not automatically transfer IP. If your MSA/SOW is silent, you’re in a gray zone.
Fix: Assign new work product to the client upon payment. Reserve the vendor’s background tools (code libraries, fonts, frameworks) and license them as embedded in the deliverables.
Short-Form IP Clause
All Deliverables created specifically for Client under an SOW issued under this MSA are, upon full payment, assigned to Client. Provider retains all rights in its pre-existing materials, frameworks, tools, fonts, and code libraries; Provider grants Client a perpetual, worldwide, non-exclusive, royalty-free license to use such pre-existing materials solely as embedded in the Deliverables.
All Deliverables created specifically for Client under an SOW issued under this MSA are, upon full payment, assigned to Client. Provider retains all rights in its pre-existing materials, frameworks, tools, fonts, and code libraries; Provider grants Client a perpetual, worldwide, non-exclusive, royalty-free license to use such pre-existing materials solely as embedded in the Deliverables.
Mistake #3: No Plan for “Who Pays If Something Goes Wrong”
This is indemnification and limits of liability—in plain English. A fair default: mutual indemnity (each covers issues they cause: IP infringement, gross negligence, willful misconduct) and a sensible cap on ordinary damages.
Short-Form Indemnity & Liability Cap
Indemnity. Each party will indemnify, defend, and hold harmless the other from third-party claims arising from its (a) IP infringement; (b) gross negligence or willful misconduct; or (c) material breach of this MSA or an SOW.
Limitation of Liability. Except for Confidentiality breaches, IP infringement, or amounts owed under indemnity, each party’s aggregate liability is limited to the fees paid or payable by Client under this MSA in the 12 months preceding the claim. No consequential or punitive damages.
Indemnity. Each party will indemnify, defend, and hold harmless the other from third-party claims arising from its (a) IP infringement; (b) gross negligence or willful misconduct; or (c) material breach of this MSA or an SOW.
Limitation of Liability. Except for Confidentiality breaches, IP infringement, or amounts owed under indemnity, each party’s aggregate liability is limited to the fees paid or payable by Client under this MSA in the 12 months preceding the claim. No consequential or punitive damages.
Mistake #4: No Clean Exit (Renewals & Termination)
Fix: 12-month initial term → month-to-month renewal with 30-day notice. Add a wind-down plan for open SOWs (final invoices, asset handoff, data return). Make survival clauses explicit (confidentiality, IP, indemnity, payment).
Short-Form Term & Termination
This MSA begins on the Effective Date and applies to all SOWs executed during the Term; it continues for 12 months, renewing month-to-month thereafter. Either party may terminate with 30 days’ written notice. Parties will complete in-flight SOWs or mutually agree to wind-down; Client pays for work performed and approved expenses. Confidentiality, IP, indemnity, and payment obligations survive termination.
This MSA begins on the Effective Date and applies to all SOWs executed during the Term; it continues for 12 months, renewing month-to-month thereafter. Either party may terminate with 30 days’ written notice. Parties will complete in-flight SOWs or mutually agree to wind-down; Client pays for work performed and approved expenses. Confidentiality, IP, indemnity, and payment obligations survive termination.
Mistake #5: Using an Outdated Template (Security & Privacy Gaps)
🎯 Takeaway: A lightweight Security Schedule + DPA (if you process personal data) speeds vendor reviews and keeps deals on track.
Security Schedule Starter
• Controls: Access management, MFA, encryption in transit/at rest
• Incident Response: Notify within [72] hours of confirmed breach
• Subprocessors: Maintain list; ensure equivalent protections
• Data Return/Deletion: Upon termination or written request
• Audits: Provide SOC 2/ISO summary reports upon reasonable request
• Controls: Access management, MFA, encryption in transit/at rest
• Incident Response: Notify within [72] hours of confirmed breach
• Subprocessors: Maintain list; ensure equivalent protections
• Data Return/Deletion: Upon termination or written request
• Audits: Provide SOC 2/ISO summary reports upon reasonable request
Order of Precedence & Acceptance (Two Quiet Win Buttons)
Order of Precedence: SOW controls scope, pricing, milestones, acceptance. MSA controls legal terms (IP, confidentiality, indemnity, limits, dispute resolution). If a legal term conflicts, the MSA prevails.
Acceptance: Write a short review window (e.g., five business days) tied to written criteria. If no rejection with specific reasons arrives on time, the deliverable is deemed accepted—with a reasonable fix-window for any miss.
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Try SMVRT Legal Free >FAQs About Common MSA Mistakes
What’s the simplest way to prevent scope creep?
Issue a separate SOW for each project with deliverables, exclusions, milestones, and acceptance steps. If it isn’t written, it’s optional—and optional becomes disputed.
Do I own the work I paid for?
Only if your contract says so. Assign new work product to the client upon payment, and license any background tools the vendor brought to the job (like fonts or libraries).
What’s a fair limitation of liability?
A common approach is fees paid in the prior 12 months, with carve-outs for confidentiality breaches, IP infringement, and indemnity amounts.
Which controls: the MSA or the SOW?
SOW controls scope, pricing, milestones, acceptance. MSA controls legal terms. If a legal term conflicts, the MSA prevails.
When do I need a DPA?
If you process personal data for a client, include a Data Processing Addendum. It reduces security review friction and clarifies breach notice and deletion on termination.
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Start Free with SMVRT Legal >This article is for educational purposes only and does not constitute legal advice.
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