Reduce Business Risk – Use an MSA

By: Danielle Palardy – Published in the BizWest Thought Leaders column in May 2021

Business owners are aware that detailed contracts are the best way to reduce risk in each transaction. However, for companies with quick customer turnover, frequent orders, or regular modifications to orders, the cost to have a contract specific to the customer and the project may be prohibitive. Many of our clients come to us because they have a dispute over invoices which form the agreement between the parties. Sometimes invoices have different terms, or no terms at all, depending on what processes and formalities the company has in place. Even those invoices containing terms, however, provide only limited protection against default. Only so many terms can be printed on an invoice before becoming the not-so-hyperbolic “fine print -” and unless each invoice is signed, the terms may be harder to enforce.

If your business operates primarily on invoices, consider using a Master Sales Agreement or Master Services Agreement for all of your customers to which subsequent invoices can refer. An MSA can cover risks that are inherent to or common in your industry, as well as unpredictable events that might impact project timelines or product availability. The MSA makes for a useful reference for your employees for what steps they need to take if something goes wrong. In addition to providing better security against contingencies and a framework for resolving them, an MSA can better cement the relationship with your customers.

Contact an attorney to craft an MSA which fits your business and your customers. Alternatively, consider having an attorney review your invoices to ensure you are best protected against default.

Already have an MSA? If it has been a while since you started using your form MSA, you may want to reevaluate the terms to make sure they continue to best suit your business practices and have an attorney review it for enforceability.

Danielle Palardy