The Ultimate Guide to MSP Agreement Templates

What is an MSP Agreement?

An MSP (Managed Service Provider) agreement is a foundational component in the business-to-business world. An MSP agreement is a legally binding solution to facilitate the long-term business relationship between you and your business partner. A well-written MSP agreement is vital to the success of every business operating within a B2B context.

Essential Elements of an MSP Agreement Template

Every MSP agreement template should include a description of the services to be provided—everything that the MSP is going to actually be responsible for. These descriptions must be as specific as possible and be updated as new services are added or services that are no longer provided are removed. If the entities are actually providing the services rather than just overseeing them, there needs to be a detailed description of what those services entail. The MSC agreement template should also include payment terms. How much and when will the entity be compensated? What payment methods will be accepted? Both parties should agree on how services will be monitored and the expectations for quality of the service. How frequently will the services be reviewed? What specific metrics will be used to track the quality of the service? How often will the MSP review reports related to quality? In what areas is the MSP expected to improve quality, and in what areas is the client expected to improve quality? In order for the agreement to be considered legally binding, it must be signed by both parties. It should also be dated, and include the names and addresses of each entity agreeing to the terms of the contract.

Advantages of Using MSP Agreement Templates

Pre-defined templates save time by eliminating the tedious process of drafting agreement language from scratch. When you already have language that identifies a scope of services, payment terms and other essential contract provisions, the writing portion of the contracting phase is much easier.
Efficiency…plus…consistency. Templates not only save time by having a lot of the necessary and repetitive language already keyed in, but also ensure that your contracts are uniform, giving you a better chance of not only staying organized, but also keeping a level playing field across all your customers.
It is also important to note that using an independent contractor template may protect you legally. When you utilize a standard agreement with your independent contractors, you can reduce the ability of the contractors to leverage what’s known as "implied contract." Implied contract is when an independent contractor, who has agreed to work as an independent contractor but then is treated as an employee (ex: being required to work certain hours and do certain work) tries to reclassify themselves by showing evidence that they were actually being treated as an employee. Implied contracts don’t necessarily hold up in court, but as they do come up from time to time – this is yet another reason to have standard agreements with your contractors.

Modifying Your MSP Agreement Template

MSP Agreement Templates come equipped with generic, general business terms such as warranties, payment terms, limitations of liability, force majeure, and depending upon what you intend to do, other terms specific to your operations. Your MSP Agreement Template should also have the supplemental services described above, but each service should be tailored to your business and to fit the services you actually deliver and to appropriately tailor the limitations on your liability ("Limitation of Liability" is a very important topic of conversation and will be addressed in a future blog post) In any fully negotiated agreement, the parties would discuss whether to include, delete, or modify certain terms. Generally speaking, for the most part, our MSP Agreement Templates contain provisions for services that are offered by a "typical" managed services provider. Any qualified attorney familiar with the relevant laws can draft terms that are specific to your MSP business. We strongly suggest and recommend that you work with an experienced attorney to tailor your agreement to your particular business and services.

Common Mistakes in MSP Agreements

Common Pitfalls in MSP Agreement Templates
One common pitfall that many businesses face when creating an MSP agreement is a lack of clarity in defining the scope and limitations of the agreement. It is important to be as specific as possible in outlining the services covered and any exclusions. Vague language can lead to misunderstandings and disputes down the line, especially when it comes to service delivery and expectations.
Another issue that frequently arises is a failure to update or revise the agreement as the business and its needs evolve. Technology and service offerings are constantly changing, and the MSP agreement should be flexible enough to incorporate those changes as needed. Additionally, the agreement should be reviewed periodically to ensure compliance with any new laws or regulations that may have come into effect over time .
One of the biggest mistakes businesses make when using MSP agreement templates is assuming that their needs have not changed since the last template was used. Even if the basic structure and language of the template remains relevant, the specifics of the agreement may need to be altered based on current industry standards or the particular needs of the business and its clients.
Finally, a frequent challenge when using MSP agreement templates is a lack of negotiation or collaboration early on in the process, which can lead to an agreement that does not accurately reflect the needs of both parties. Both the business and the MSP provider should be on board with the final agreement and should be given the opportunity to ask questions, raise concerns and clarify any ambiguities before proceeding.

Legal Aspects of MSP Agreements

The agreement you draft, whether it be a joint venture, subcontractor, or other form of agreement, may have legal implications that are either prohibitively expensive or otherwise burdensome if not addressed and resolved up front. More particularly, there are several areas of the agreement that should be addressed in order to alleviate some of your practice’s risk. For example, you may want to specifically address the following issues in your agreement:
• Liability Related to Medications, Treatments, and Services
The parties should clearly specify their respective liabilities to prevent the MSP from being held liable for the negligence of its partners, shareholders, employees, or agents as set forth above. This is the most significant issue in regard to liability. For example, in the event a patient claims an adverse outcome from the administration of an injectable medication, the MSP may wish to specifically narrow the circumstances under which a claim could be asserted. In this scenario, the MPN could attempt to show that it was not responsible for the alleged adverse outcome because it did not purchase or label the medication, administer the medication, or receive the waste product from the administration or improper storage of the medication.
• Indemnity Provisions
Most agreements include an indemnity provision whereby one party agrees to indemnify the other for certain acts. In a typical MSP agreement, both parties may wish to indemnify one another for claims arising from their respective negligence resulting in harm to a patient. It is important to exclude any claim that is determined to be the result of willful misconduct.
• Independent Contractor Status
The MSP entity is typically an "independent contractor" of the MPN in that it is not authorized to control or otherwise dictate the manner and means by which the MPN provides the medical services. Stated differently, the MSP entity is not an "employee" of the MPN. The fact that the MSP is an "independent contractor" does not, however, relieve the MPN completely of liability for the negligent acts of the MSP. The MSP may additionally be vicariously liable for an independent contractor’s negligent, as long as the MPN exercised some right of control over the independent contractor.
In California, in the context of the employer-employee relationship, an employer can lose its statutory limitation of liability for the negligent acts of its employees through complex "borrowed servant" or "respondeat superior" doctrines. A similar theory holds that MSPs, through agreements with the MPN, are sometimes deemed to be acting on behalf of the MPN rather than the MSP. Therefore, if the MPN retains some control over the MSP and its employees, the MPN may be held vicariously liable for the negligent acts of the MSP or any of its employees.

Selecting the Appropriate MSP Agreement Template for Your Company

The following should be taken into consideration when choosing the proper MSP agreement template.
Quality of Work Products
The template’s dependability in expediting the timely delivery of quality work products is an integral part of a vendor’s overall service level proposition, and should be considered accordingly.
Help Desk Capability
For example, whether the template provides for a proactive help desk for the submission and tracking of: (i) requests for service, (ii) requests for information, (iii) service or product complaints, (iv) quality control issues, and (v) other general inquiries. Whether there is an additional cost associated with the Help Desk for end users, and whether there are any related caps or limitations to the Help Desk.
Guidelines relating to the monitoring of consultant activity and the imposition of sanctions or incentives. These guidelines should provide a graduated system of sanctions for repeated infractions.
Services Level Agreement ("SLA") and Key Performance Indicators ("KPI")
Does the template include and address the following:
Ultimate decision making authority, dispute resolution guidelines, and escalation steps in the event conflict or disagreement arises.

Evaluating and Revising Your MSP Agreement

Just as it is crucial to comprehensively review the MSP Template Agreement prior to executing it, it is also essential to periodically review the MSP Agreement to determine if it should be revised. While the MSP Template Agreement contains various options regarding certain agreements in an effort to address a variety of situations, such options may not be appropriate for the billing relationship between the principal and agent. In addition, provisions in the MSP Template Agreement may no longer be consistent with statutory or regulatory changes or other changes with which either party is uncomfortable or unhappy . Moreover, as a new MSP agreement is executed or as new Contracts are executed or renewed, CPAs face significant enforceability challenges as a result of never having updated all of its old MSP Agreements and ensuring that those had been properly implemented and recorded with the appropriate parties. As the above is the case, it is critical that CPAs ensure they create a systematic process for reviewing and updating agreements on an ongoing basis. Failure of CPAs to adequately address the above issues may result in the Principal or Agent being exposed to significant risk liabilities.