Master Service Agreements (MSAs) set the tone for long-term business relationships — but small mistakes can cost thousands. Learn the top five MSA mistakes SMBs make, why they happen, and how to avoid them using modern templates and compliance tools.
A Master Service Agreement (MSA) is the legal foundation between a client and a service provider. When done right, it saves time, reduces disputes, and sets clear expectations. But when written poorly, it can lead to delayed payments, IP loss, or even litigation. Many small businesses reuse outdated templates or skip critical clauses.
Below, we break down the five most common — and costly — MSA mistakes we see, with concrete examples, practical fixes, and short sample clause language you can adapt.
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Get Your Free MSA Template >An unclear scope of work (SOW) is the #1 cause of conflict under MSAs. Without precise deliverables, timelines, and revision limits, projects spiral — leading to scope creep, delays, and extra costs.
Example: You hire a programmer to build a landing page. You assume page speed optimization, mobile responsiveness, and basic analytics are “understood.” The developer finishes a static desktop page and says speed, mobile, and analytics are extra. The quote increases, your timeline slips, and both sides are frustrated.
Why it matters: A clear SOW saves money, time, fatigue, and relationships — and helps projects move smoothly.
Fix: Attach a detailed SOW for each project and cross-reference it in the MSA. Define deliverables, exclusions, acceptance criteria, revision limits, change-order process, and billing for out-of-scope work.
Sample SOW Checklist • 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 submission 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 (examples): A/B testing, custom analytics dashboards, copywriting
Learn more in our Statement of Work Guide. Take your time defining the SOW to ensure your project moves faster.
Many SMBs assume they own the work product by default. Unless the MSA expressly assigns ownership, the provider usually retains it — risking your ability to reuse or modify deliverables you paid for.
Example: A creative agency designs brand assets and a slide deck. Later, the client reuses templates across campaigns. The agency claims ownership and requests additional licensing fees because the MSA never assigned IP to the client and didn’t carve out pre-existing tools and fonts.
Fix: Assign IP in new deliverables to the client upon payment, while reserving vendor rights to pre-existing materials, frameworks, code libraries, fonts, and tooling used to create the deliverables.
Sample IP Clause (Short-Form) All Deliverables created specifically for Client under this MSA (“Work Product”) 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 Work Product.
Weak or missing indemnification leaves you exposed to third-party claims. No liability cap = potentially unlimited damages for ordinary mistakes.
Example: A marketing contractor uses a licensed image incorrectly in a client campaign. The rights holder sends a demand letter for $15,000. Without an indemnity, the client and contractor fight over who pays. Without a liability cap, either party could face outsized exposure far beyond project fees.
Fix: Include mutual indemnification (e.g., each party covers its IP infringement, gross negligence, or willful misconduct) and cap liability (e.g., fees paid in the last 12 months), with carve-outs for fraud and intentional misconduct.
Sample Indemnity & Liability Cap (Short-Form) 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. 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.
If the MSA doesn’t define how (and when) it ends, you can be locked into unfavorable terms or miss critical notice windows.
Example: Your MSA auto-renews for 12-month terms unless you cancel 60 days before renewal. You miss the window and are stuck for another year, even though you only wanted occasional SOWs.
Fix: Use a 12-month initial term, then month-to-month renewals with 30-day notice. Add termination for convenience (30 days) and a wind-down plan for open SOWs: final invoices, IP handoff, and data return.
Sample Term & Termination (Short-Form) Term. This MSA begins on Effective Date and continues for 12 months, renewing month-to-month thereafter. Termination for Convenience. Either party may terminate with 30 days’ written notice. Effect of Termination. Parties will complete in-flight SOWs or mutually agree to wind-down; Client pays for work performed and approved expenses. Survival. Confidentiality, IP, indemnity, and payment obligations survive termination.
Legacy templates often ignore today’s realities: data privacy, remote work, security audits, and state-specific rules. That can derail vendor onboarding and create compliance gaps.
Example: A SaaS vendor pursues a healthcare client. During security review, the MSA lacks a data processing addendum (DPA), breach notice timelines, and a security schedule (e.g., SOC 2). Onboarding stalls, the deal slips a quarter, and procurement requires legal rework.
Fix: Use a modern, state-aware template and update every 2–3 years. Include a Security/Compliance Schedule, DPA (if processing personal data), and clear privacy and breach terms.
Modernization Checklist • Privacy & Security: DPA, breach notice (e.g., within 72 hours), data handling & deletion • Compliance: Reference SOC 2/ISO27001 (if applicable), subcontractor controls • Remote Work: Access controls, BYOD, VPN, offboarding procedures • State Specifics: Choice of law & venue, enforceability nuances
Leaving deliverables and payment terms undefined — it invites scope creep, delays, and disputes.
Yes and here’s a quick checklist to assist you with repurposing for your new usecase:
Bottom line: Reusing is fine if you validate fit, fill gaps, and modernize the risky sections. Our AI summaries, clause checklists, and chatbot make the review fast and clear.
Either side can draft it; both should review. Vendors focus on liability caps; clients on IP ownership and payment protection.
Check the “order of precedence.” Typically the SOW controls specifics; the MSA controls general terms.
MSAs don’t have to be complicated, but they must be clear. By addressing scope, IP, indemnity, termination, and modernization, you’ll avoid the most common MSA mistakes and keep projects running smoothly.
Start with our Master Service Agreement Guide or generate your own MSA in minutes using SMVRT Legal’s AI-powered tools.
This article is for educational purposes only and does not constitute legal advice.