Creating a Sound Master Service Agreement with AI

Date
March 4, 2021
Category
Date
March 4, 2021
Author
Gary Sangha | Founder & CEO
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Master Service Agreements (MSA) establish the business relationship framework between companies and set the tone for future business dealings. LexCheck’s artificial intelligence (AI) contract review platform ensures these long-term agreements conform to your negotiation playbook standards. 

Company representatives shake hands over a successful master service agreement

The Goal of a Master Service Agreement 

The Master Service Agreement is generic by nature and can apply to a diverse array of business relationships. Executing a contract with the needed provisions for every job would be prohibitively time-consuming. Instead, an MSA creates the basis for future contract management by settling these two key provisions: indemnification and risk allocation. 

Indemnification

Risk Allocation

This provision establishes responsibilities for liability by identifying which party has to pay damages when a party is injured by an action in violation of the agreement. It also determines who is required to defend claims arising from a breach of the terms of the agreement. This section should be compared with any existing insurance contracts to ensure existing terms are not breached. 

This section clarifies the risks involved in a business relationship and then assigns those risks to parties in the agreement. For example, the section may define who is responsible for property damage due to contractor operations. This clause also requires comparison to existing contracts. 

 

These are two of the broad provisions that the MSA resolves; hundreds of smaller clauses may fall under each of these overarching categories. 

What’s Covered with an MSA?

The MSA should be generic enough to govern future contracts. As a result, the agreement should not include details regarding specific jobs. Instead, individual projects would require clarification through a work order or a similar agreement. Typically, the MSA covers: 

  • Overall payment terms
  • Intellectual property ownership
  • Social responsibility and ethics policies
  • Dispute resolution 
  • Termination provisions
  • Warranties 

In short, if the provision would apply to any contract with a counterparty, it should be in the Master Service Agreement. This way, parties can streamline contract drafting and negotiation for future deals. MSAs present massive time-saving opportunities, but they can also introduce significant risk if executed poorly. 

AI Enhances the MSA 

Master Service Agreements tend to start from standard templates. Unfortunately, templates cannot cover business relationship-specific nuances. And an attorney would need to cross-reference potentially dozens of contracts to catch errors and omissions. Contract review technology powered by artificial intelligence proves a viable alternative to this time consuming attorney evaluation challenge.

Consider a common oversight of MSAs:

In a typical MSA, one company may wish to limit their responsibility for incidents directly caused by their activities. However, they may forget to include provisions limiting their liability when incidents are outside their control—like weather occurrences or natural disasters—resulting in an inability to deliver on their contractual obligations. 

Leverage AI to eliminate oversights:

LexCheck’s AI reviews the contract and compares it with previously negotiated agreements, noting any omissions that could cause additional liability and redlining the section. Additionally, next-generation natural language processing (NLP) algorithms enable our platform to suggest inline insertions that adhere to your organization’s playbook and adapt to the language of your contracts.

Master Service Agreements affect multiple entities and incorporate a variety of clauses and terms. LexCheck’s contract negotiation platform eliminates mistakes and oversights by providing an automated legal review powered by AI and optimized for even the most complex contracts.

LexCheck can improve your Master Service Agreements with a granular review that highlights potential issues and helps you target the right negotiation points. To discover our benefits, request a demo.

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