MSAs v SOWs: the perfect recipe for a successful business relationship
What is the main difference between an MSA agreement and SOW?
The MSA agreement outlines the overarching legal terms and conditions that govern the relationship between the supplier and customer, while the statement of work usually deals with the specifics of a single project or scope of work.
How do an MSA agreement and SOW work together in practice?
Although an MSA agreement and SOW are two very distinct contracts made up of different components, they work together to create a robust legal and commercial framework. It may sound a little bit silly, but a great analogy for an MSA and SOW is a sandwich. Just as a sandwich is incomplete without both slices of bread and a tasty filling, a particular project or transaction would not be complete without having both of these contracts in place.
The MSA agreement is like the bread, providing the foundation for the business relationship. It sets out the basic legal terms and conditions, such as things like payment terms, liability, confidentiality and how to terminate the agreement. The MSA agreement sets the expectations for the entire business relationship and lays down the legal foundations, just like the bread that holds the sandwich together.
On the other hand, the SOW is like the filling of our sandwich providing flavour and texture. The SOW outlines the unique details, objectives, deliverables, timelines and any other specific requirements for that particular project or transaction. Without the SOW, you would have very little detail surrounding the commercial aspects of the project. Together, the MSA and SOW create a complete package for a business relationship, just like the bread and filling create a complete sandwich.
The MSA provides a robust legal framework, while the SOW provides more granular project-specific details. Just like a well-balanced sandwich, the MSA and SOW work in harmony to ensure the business relationship operates smoothly and efficiently.
If you have more questions about MSA agreements, check out these FAQs where our legal experts debunk the most commonly asked questions about framework agreements (aka MSA agreements).
Key terms of MSA agreements v SOWs
The MSA agreement and SOW are both required to create a full legal agreement to facilitate a particular project or transaction. Both are key components of the sandwich, however, they’re made up of very different ingredients. Each contains separate terms and conditions to create a full picture of the services to be provided.
Here are some fundamental terms that each document includes:
What terms does an MSA agreement template include?
An MSA agreement typically includes:
General background of the services: the MSA agreement will usually provide a brief overview of the type of services that will be provided. For example: “The supplier is a marketing specialist and will provide marketing and SEO strategy services to the Customer.” This will only be a general overview, as the more in-depth breakdown of the services will be specified in the SOW.
Term of the contract: this clause confirms how long the agreement will last and if it will auto-renew or expire.
Responsibilities: these terms will set out the general obligations and duties of each party. For example, in the customer's responsibilities section, the customer will need to provide the supplier with the necessary access to the customer's systems or on-site location in order for the supplier to provide the services. On the other hand, the supplier's responsibilities clause may place a contractual obligation on the supplier to provide the services with reasonable skill and care.
Acceptance testing: this is a general framework of how the customer will evaluate and approve the deliverables. This is the process to be followed once the deliverables are provided to the customer, however, specific acceptance testing criteria for particular deliverables will be set out in the SOW. It should also set out how the supplier will deal with any defects or issues raised during acceptance testing.
Charges and payment: this clause outlines how and when the supplier will be paid, and also the consequences of late payment.
Requests for changes: the MSA agreement will also provide the procedure that the parties must follow if there need to be any changes to the terms that were originally agreed.
Warranties: the MSA agreement may also include contractual promises or assurances (known as warranties) that will be given with regard to the quality of the services. If you want to find out more about warranties, click here.
Limitation of liability: if something goes wrong, the MSA agreement will set out the extent of the parties’ liability and potential damages.
Intellectual property rights (IPR): this clause will clarify the ownership and usage rights of intellectual property under the MSA agreement. For more information about protecting your IPR in an MSA agreement, our lawyers have created this handy guide.
Indemnities: depending on the circumstances, the MSA agreement may also include any indemnities to reallocate the parties’ responsibility if a particular unwanted event occurs. Simply put, an indemnity is a contractual assurance to pay the other party for any losses or claims that arise if a certain event occurs, such as intellectual property infringement or a breach of the agreement. To gain a more in-depth understanding of indemnities without legal-jargon, check out this blog.
Dispute resolution: the contract will usually also identify the preferred method for resolving disputes that may arise if there is a dispute, such as negotiation, mediation or arbitration.
Termination: this clause sets out who can end the agreement early and the notice period that will be required to do so. It will also usually set out any consequences of termination.
Non-solicitation clause: if you’re worried about the other party poaching your best talent, the MSA agreement can also include terms that prevent the solicitation of your employees or contractors.
For a deeper dive into the key clauses contained in an MSA agreement, take a look at our ultimate guide.
What terms does a SOW include?
A statement of work (SOW) should typically include the following key clauses:
Scope of services: A well-drafted SOW should clearly define the specific deliverables, tasks, and objectives of the project or transaction.
Contact details: This will include details of the project managers from each party and any other relevant contacts, locations and when meetings will take place to keep track of the project’s progress.
Project timeline and milestones: This section will outline the proposed timeline for completing each phase or milestone of the project, including start and end dates.
Responsibilities: If the are any project-specific responsibilities or obligations that need to be carried out by either of the parties relating to the services or deliverables, these will be included in the SOW.
Acceptance criteria: These are the specific conditions that the completed work or deliverables must meet for the client to accept and approve them. They define the quality, functionality, performance, or other requirements that ensure the work aligns with the client's expectations and is considered satisfactory.
Fees: This includes the specific fees relating to the project and any payment schedules.
Termination: The SOW will also outline the steps and timeframe for terminating the SOW before its intended completion.
In conclusion, together MSAs and SOWs serve as the perfect recipe for a successful business relationship. Just like a sandwich, where the bread provides a sturdy foundation and the filling adds flavour and uniqueness, the MSA agreement sets the legal framework and the SOW adds the specific project details. Together, they create a harmonious balance that streamlines communication, establishes clear expectations and ensures smooth collaboration.
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