For Agencies & Clients

Master Your Service Agreements

Q: What is the difference between MSA and SOW?

An MSA (Master Service Agreement) sets the baseline legal terms (confidentiality, payment terms, liability) for a long-term relationship. An SOW (Statement of Work) is signed for each specific project under the MSA to define deliverables and timelines.

Q: What is a fair liability cap?

A standard liability cap is often limiting damages to the total fees paid in the preceding 12 months. Startups should avoid caps that are multiples of the fee (e.g., 5x fees) or 'unlimited liability' clauses.

Q: Can a client terminate for convenience?

Yes, most service agreements allow 'Termination for Convenience'. However, you must ensure there is a notice period (e.g., 30 days) and a clause covering payment for all work done up to the termination date.

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The Problem with Mismatched Documents

Most B2B relationships involve two key documents: the **MSA (Master Service Agreement)** which sets the long-term rules, and the **SOW (Statement of Work)** which defines the specific project.

A common disaster scenario is when the SOW contradicts the MSA. For example, the MSA might say "Payment in 30 days," but the SOW slips in "Payment upon acceptance," allowing the client to delay paying indefinitely by never "accepting" the work.

3 Clauses That Can Bankrupt You

1. Unlimited Indemnity: Agreeing to pay for ANY loss, even third-party claims not caused by your negligence? This can be an infinite liability. Limit it to your fees.
2. Termination for Convenience: If the client can fire you with 7 days' notice but you booked your team for 6 months, you lose money. Demand a longer notice or a kill fee.
3. Exclusivity: Does the contract ban you from working with *any* other client in the "same industry"? This can kill your agency's growth.

SOW Audit

✓ Deliverables defined?

Is "success" clearly measured?

✓ Payment Schedule

Is it tied to dates or milestones?

✓ Revision Cap

Are rounds of changes limited?

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AI Analysis: Key Risks

Critical Risk

Indemnification

Broad "hold harmless" clauses that cover third-party claims. We ensure it's limited to your negligence only.

High Risk

Payment Terms

"Net 60" or "Pay when Paid." We flag extended payment terms that hurt cash flow.

Medium Risk

Force Majeure

Does it cover pandemics or key person incapacity? Essential for service continuity.

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Common Questions

What is the difference between MSA and SOW?

An MSA (Master Service Agreement) sets the overall legal terms (confidentiality, liability) for the relationship. An SOW (Statement of Work) defines the specifics of a single project.

What is a fair liability cap?

A fair cap is usually the total fees paid in the previous 12 months. Avoid caps that are multiples (e.g., 5x fees) or "unlimited".

Can a client terminate for convenience?

Yes, but ensure there is a notice period (e.g., 30 days) and a "termination fee" covering work done and costs incurred.

Other Contract Types

Freelance Contract | Consulting Agreement