In the service industry, the business deals amid the Supplier and the Customer will be effectuated via execution of a Master Service Agreement.
Master Service Agreement (MSA) is the prime document amid the Supplier and the Customer establishing a legal business relationship amid the Supplier and the Customer in relation to supply of certain goods/services.
Typically MSA will define the contractual terms and conditions of the legal business relationship amid the Supplier and the Customer.
Such contractual terms and conditions may include Acceptance provision, Change Request Form, Limitation of Liability provision, Indemnity provision, Termination provision, Assignment provision, Payment terms provision, Governing Law provision, Representations and warranties provision, Entire Agreement provision etc.,
As part of the business commitment, the Supplier will be obligated to provide specific deliverables to the Customer in different timelines and locations depending upon the project specific requirements of the Customer.
Execution of the MSA will be the first step in establishing the legal business relationship amid the Customer and the Supplier.
Customer will have different requirements at different junctures during the term of Master Service Agreement. Moreover, it will be improbable to predict the future requirements of the Customer and integrate them into the Master Service Agreement.
Here the question is how will the Supplier provide specific (existing/future) deliverables to the Customer in different timelines and locations under the Master Service Agreement?
Statement of work (SOW) is the right solution for this question. During the MSA Term, as and when there is a specific Customer requirement then the Customer and the Supplier will execute a statement of work reflecting the terms and conditions associated with such specific project requirement.
A Statement of Work will be designed to deliver specific deliverable and services by the Supplier to the Customer subject to the MSA terms and conditions – SOW will contain the details of the specific project, mode of work performance, appointment of supplier personnel (who will work on the project) , pricing and deliverable deadlines.
An illustration to clearly demarcate the connection amid the Master Service Agreement and the Statement of Work:
Assume that the Supplier is in the business of technical support and maintenance for computers and software.
The Customer intends to engage the Supplier to provide technical support and maintenance to the Customer as and when needed.
Say the Customer and the Supplier had executed the Master Service Agreement dated March 31, 2019 (MSA) for the provision of technical support and maintenance.
In June, 2019 the Customer and the Supplier had entered into a Statement of Work (SOW 1). Pursuant to SOW 1 the Supplier agrees to provide technical support to the Customer for specific project named ‘X’ in the location of Delhi.
Again, in October, 2019, the Customer had another requirement of technical support for different project named ‘Z’ in the location of Hyderabad. Accordingly, the Customer and Supplier had executed another Statement of Work (SOW 2).
From the aforesaid illustration, it is very clear that the MSA had established legal business relationship amid the Supplier and the Customer. SOW 1 and SOW 2 had facilitated the Supplier to provide technical support to the Customer projects in different timelines and locations.
Typically, MSA will reflect the legal terms and conditions of the business relationship amid the Customer and the Supplier. SOW will mostly reflect the business terms and conditions of a specific project.
SOW will enable the Supplier to render services to the Customer according to the Customer specific requirements in different timelines and locations during the MSA term.
MSA will be the master governing document of the business relationship. SOWs will be child documents to the MSA. SOWs will be governed by the terms and conditions of the MSA.
If there is any overlap amid the terms and conditions of the MSA and SOW terms and conditions then the MSA Terms and conditions will supersede the SOW terms and conditions.
Termination of MSA will result in the termination of all SOWs executed pursuant to that MSA. Termination of SOW will not terminate the MSA as MSA is the supreme document and will get terminated on its own.
MSA is the origin document of the business relationship amid the Customer and the Supplier. SOW will define the specific services to be rendered to the Customer by the Supplier.