An MSA (Master Services Agreement) operates as a contractual framework for the supply of products and/or services. The MSA sets out the terms and conditions which will apply to each order placed by the customer, dispensing with the need to renegotiate the Ts&Cs for each contract. Normally an MSA does not by itself create any obligations to supply any goods and/or services, although it is usual for the initial order to be negotiated and agreed in parallel with the MSA.
Issues to consider include:
1. Does the MSA require the supplier to accept orders placed by the customer, or is each order subject to negotiation of order-specific commercial terms (eg price and delivery times)?
2. If the MSA includes pricing, can the supplier increase the prices at any time during the term of the MSA? Are prices inflation-indexed? Who carries the risk of exchange rate movements?
3. Are there penalties for late delivery? Instead of – or as well as – claiming penalties, can the customer cancel the order, or even terminate the MSA?
4. Is there a process for acceptance of the products or services by the customer? What happens if the deliverables fail acceptance testing? Does the supplier have the right to make changes to the products or services?
5. What happens if the customer fails to pay the supplier’s invoice? As well as suing for non-payment, can the supplier require goods to be returned, or suspend the services, or even terminate the MSA?
6. If the supplier is providing support, does the MSA include service levels? Are service credits payable if service levels are not met? Is the supplier excused from paying service credits where the failure is outside their control? How poor does the support need to be in order for the customer to be entitled to terminate?
7. When does title to any products pass to the customer? What happens if the customer fails to pay for the products? Or goes bust?
8. Is the supplier’s liability capped in case of breach? Are any limitations or exclusions of liability legally compliant, ie enforceable?
9. Is the supplier restricted from supplying the customer’s competitors? Are the restrictions lawful/enforceable?