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Master Service Agreement (MSA)

A Master Service Agreement (MSA) is a legally binding contract that establishes the terms and expectations between two parties engaged in an ongoing business relationship. Understanding how MSAs work, who drafts them, and how to implement them is essential for any organization working with third-party vendors or service providers.

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About this video

Legally binding agreements are a foundational element of any business relationship, and the type of agreement used depends on the nature and duration of that relationship. A simple one-time engagement might call for a standard contract, while a subscription-based service typically involves a terms of service. When two parties expect to work together across multiple projects or engagements over time, a Master Service Agreement (MSA) is the appropriate instrument. An MSA establishes the rights, responsibilities, and expectations of both parties upfront, eliminating the need to negotiate a new contract for every individual project. The process of executing an MSA follows a straightforward workflow. The service provider typically prepares and sends the agreement to the client, who reviews and signs it before returning it. The service provider then countersigns and sends a copy back, ensuring both parties hold a fully executed version. In cases where a vendor does not have an existing MSA, either party can source a template and collaborate on developing one, though any customization should be reviewed by qualified legal counsel to avoid unintended contractual implications. Although no universal legal requirement mandates the use of an MSA, it is a recognized best practice across many cybersecurity and IT governance frameworks, and many organizations require their vendors to have one in place before a business relationship can begin. Organizations operating without some form of binding agreement — whether a contract, terms of service, or MSA — expose themselves to significant risk in the event of a dispute. Adopting an MSA where ongoing vendor relationships exist is a practical and professional standard that protects both parties and supports sound third-party risk management.

What you'll learn

Explain the purpose and use of a Master Service Agreement (MSA) as a legally binding contract between two parties engaged in ongoing business relationships
Distinguish between common vendor agreement types — including terms of service, individual contracts, and MSAs — and identify when each is appropriate

What's covered

Master Service Agreements

What is an MSA
- Legally binding contract
- Two parties doing business
- Multiple engagements or projects
Types of Business Agreements
- Terms of service
- Contractor contracts
- Master service agreement
MSA Signing Process
- Service provider drafts MSA
- Both parties sign and exchange
- Both retain co-signed copies
MSA Requirements and Use
- Not legally required by law
- Protects both businesses
- Customers may demand it
- Referenced in some frameworks
Creating an MSA
- Use existing templates
- Customize to your needs
- Seek legal counsel approval

Aligned to

CompTIA Security+

5.3 Explain the processes associated with third-party risk assessment and management.

ISC2 CISSP

1.4 Understand legal, regulatory, and compliance issues that pertain to information security in a holistic context

1.11 Apply Supply Chain Risk Management (SCRM) concepts

NIST CSF

GV.SC-05 Requirements to address cybersecurity risks in supply chains are established, prioritized, and integrated into contracts and other types of agreements with suppliers and other relevant third parties.

NIST 800-53

SA-9 External System Services

NIST NICE

S0797 Skill in negotiating vendor agreements

Key terms

Master Service Agreement: An umbrella contract established between a service provider and a customer that governs the overall business relationship and under which future work or services are conducted.
Terms of Service: An agreement between a service provider and a user that outlines the rules, rights, and responsibilities governing use of a product or service.
Vendor Agreement: A formal contract between a business and a third-party provider that defines the terms under which services or goods are delivered.

Topics

Master Service Agreement Vendor Management Third Party Risk Legal Contracts Governance Risk Compliance Terms Of Service

Transcript

Anytime that there's two entities that are doing business together, you really should have some agreements set up, some legally binding agreements. For instance, if there is an online service that I'm subscribed to, I probably have agreed to a terms of service, and that's the legally binding agreement between me and that service provider. If I'm working with a contractor and hiring a contractor, we're going to want to have a contract for that engagement, for that time that we're working together.

What often happens is that if I'm continually working with a single provider and I'm going to be utilizing their services more than once, we may not want to have this big long contract for every single engagement. Well, that's where a master service agreement comes into play, or an MSA.

What an MSA is

A master service agreement is a legally binding contract where, if two parties want to do business together, they lay out the contract on what is expected on both parts and then they both would sign that. So that's what an MSA is used for, and generally it's used if you're going to be doing multiple engagements or multiple jobs, multiple projects together with this manag service provider.

I'm not aware of any laws or regulations that are going to legally require you to have a master service agreement set up with any other business that you're doing business with. However, it is a protection for both businesses, and I have had customers demand it from my organization, when I'm working with other vendors, that I have some sort of MSA set up. I also have seen it in some of the frameworks. So it is something that you really should have. You should either have a contract, a terms of service, or an MSA set up with these entities.

Who provides the agreement

A master service agreement gets signed by both parties, but who provides the actual contract and how it's written? Usually that's the service provider. So if I were to go to a vendor and ask for services, they would be sending me the master service agreement. I would sign it, would send it back to them, they would then reverse sign it and then send me a copy. If I'm providing the services, then I would send the master service agreement to the person I'm providing those services to. They would sign it, they would send it back to me, I would sign it, and then I'd send them a copy, so we both have copies of it co-signed there. So that's typically how it works.

But I could possibly, if I find a vendor that doesn't have a master service agreement already set up, go and download one, and then we could create it together and then sign it. Here's a free template by the State of Washington for a master service agreement. Although this is extensive, it doesn't necessarily need to be this extensive, but there are different sections to this master service agreement. So what you could do is you could take this template, remove the parts that you don't need, and add to it the parts that you would need. And then I always recommend, if you're making any changes to these, just get approval through some sort of legal counsel, maybe some sort of lawyer that takes a look at this and makes sure that you didn't make any contract changes.

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