The Right Way to Use MSAs & SOWs

The Master Service Agreement (MSA) and Statement of Work (SOW) format is powerful! But do you know the right way to manage your contracts? If not, then this post is for you. After reading this post you’ll be ready to simplify your contract negotiations and protect your business.

This post covers:

1. How the format is supposed to work
2. Why the format is so effective
3. Best practices for using this format successfully

Looking for simple, reliable contract templates?
Check out my MSA/SOW Client Agreement and MSA/SOW Contractor Agreement, both available today!

What is the MSA/SOW format?

A Master Service Agreement establishes the overall legal terms between two parties, while a Statement of Work focuses on specific and individual projects. Most MSAs are between 5 and 20 pages in length, while SOWs are as short or long as needed for the project. The SOW may be just one page, or 20+ pages for complex projects. You’ll inlucde projects specifics in the SOW, such as scope of work, specific deliverables, and project-specific payment terms .

Once an MSA is in place, new projects can be added through additional SOWs without renegotiating the underlying legal framework. Each SOW is attached to and governed by the MSA, ensuring consistency and efficiency.

What are the benefits of using MSAs and SOWs?

This structure is designed for efficiency, flexibility, and risk management. Here’s why businesses prefer this approach:

• Faster negotiations: You only need to negotiate the “legal stuff” once (in the MSA).
• Long-term usability: An MSA can remain in place for years, covering multiple SOWs.
• Project termination: A party can terminate SOWs one at a time.
• Legal clarity: MSAs reduce disputes and misunderstandings within SOWs.

Best practices when using MSAs and SOWs

While this format simplifies contract management, it only works effectively if properly structured. Here are key best practices for each document:

The MSA

• Clearly state that Statements of Work will be used and subject to the agreement.
• Define the term (length) of the MSA and include automatic renewal provisions if necessary.
• Cover essential terms, like payment, intellectual property, confidentiality, and liability.
• Clarify which document will control if conflicts arise between their terms.
• Allow SOWs to continue after the MSA expires (if desired).
• Clearly state whether individual SOWs can be terminated separately.
• Provide for what happens if an SOW is terminated early.

The SOW

• Explicitly reference the MSA that governs the SOW.
• Do not sign a Statement of Work if the master agreement is not active.
• Assign a unique identifying number to each SOW for easy reference.
• Clearly define each party’s obligations, including services, deadlines, and payments.
• Add additional project-specific terms to the Statement of Work as needed.

Template Considerations

• Templates: Businesses should create standardized templates to save time.
• Review: Use an attorney to ensure your templates are legally sufficient.
• Ongoing updates: Update your templates as your businesses evolve.

An Outline for MSAs and SOWs

Here’s a basic outline of provisions you might see in each document:

The Master Service Agreement

• Services (that services will be described in one or more SOWs)
• Payment (default payment terms, with reference to SOWs)
• Expense Reimbursement Rules
• Ownership of Intellectual Property
• Confidentiality
• Non-Solicitation (of clients and/or of workforce)
• Indemnification
• Insurance
• Term/Length (of the MSA)
• Termination
• Force Majeure
• Obligations Upon Termination
• Disclaimers
• Limitations of Liability
• Relationship of the Parties
• Entire Agreement
• Amendments
• Waiver
• Severability
• Assignment (whether allowed or not)
• Notices (how they are to be delivered)
• Governing Law
• Jurisdiction
• Waiver or Jury Trial
• Signatures (what is allowed)
• Signature Blocks (for both parties)

The Statement of Work:

• Express Reference to the MSA
• Term/Length (if applicable)
• Services (project-specific services/deliverabls)
• Anything Expressly Excluded from the Services/Deliverables
• Payment (project-specific payment terms)
• Additional Terms (anything else unique to this SOW)
• Signature Blocks (for both parties)

Want a DIY option for your contracts?
Check out my Client Agreement MSA & SOW and Contractor Agreement MSA & SOW, both available today!

Identify the Parties & Sign it Right

Your MSA and SOWs will only be truly effective if you properly identify the parties and sign the contract the right way. Here’s a short example of the right way to sign your contract.

Final Thoughts

For businesses in Kansas City, Boulder, and across industries, this contract format is a highly effective tool for managing long-term business relationships. It simplifies contract negotiations, ensures legal protections, and allows companies to scale their operations efficiently. By following best practices, businesses can maximize the benefits of this contract structure while reducing risk. Also keep in mind you can use AI to help you with your contracts, but consider the risks: Check out my thoughts on using AI to draft contracts.

*This article is general in nature and is not legal advice.