What is an MSA?

The clauses that actually matter

Intellectual property ownership. The default rule is that the creator owns the work product. For service businesses, this means your client doesn't own the deliverable unless the MSA assigns it to them. For clients, this means you don't own anything unless you got a written assignment. Most LegalZoom MSAs handle this poorly — either over-assigning (the vendor assigns everything, including background IP they need for other clients) or under-assigning (the client gets a license but not ownership, which matters at acquisition).

Indemnification. Who covers the other party if the work causes harm to a third party? Indemnification clauses determine whose problem it becomes when something goes wrong. Mutual indemnification is standard in balanced commercial MSAs. Watch for one-sided provisions where the vendor indemnifies the client for basically anything.

Limitation of liability. This caps what either party can owe the other if something goes catastrophically wrong. The standard carve-outs — for willful misconduct, gross negligence, and confidentiality breaches — are as important as the cap itself. Many template MSAs forget the carve-outs and create unlimited liability for IP infringement, which no vendor should accept.

Termination. Can either party terminate for convenience? With what notice? What happens to work in progress? Who pays for deliverables completed but not yet invoiced? Termination for breach is standard; termination for convenience terms vary significantly.

Payment terms. Net 30 is a norm, not a right. Your MSA should specify your terms, your late payment rate (often the lower of 1.5%/month or the legal maximum), and your right to suspend work on overdue invoices.

Governing law and venue. Which state's law governs, and where would a dispute be resolved? This matters more than people expect. Choosing a venue in your client's state can mean you're litigating in a court you've never practiced in, under different statutes.

Negotiating an MSA as the client

• ✓Push for full IP assignment with carve-outs for vendor background IP (pre-existing tools and methods). You need ownership, not a license, for M&A purposes.
• ✓Cap liability at the fees paid under the applicable SOW, not the whole MSA.
• ✓Require the vendor to carry appropriate insurance (E&O for professionals, commercial general liability for others).
• ✓Define acceptance criteria clearly in each SOW — "completion" in an MSA is often vague.

Negotiating an MSA as the vendor

• ✓Protect your background IP explicitly — your pre-existing tools, libraries, and methods. Assign the deliverable; license the rest.
• ✓Limit your indemnification to what's actually your fault. Don't accept broad indemnification for third-party claims you can't control.
• ✓Build in a payment suspension right for non-payment.
• ✓Add a portfolio/reference right — the right to show the work to future clients. Clients don't always offer this by default.