Which is Better for Your Business: An Agreement, a Contract or a Master Service Agreement?

There was a time when business could be done with a simple handshake and a promise. While verbal contracts still exist, most companies understand the importance of getting service and payment agreements in writing in order to protect both parties involved in a business relationship. Today, the pendulum has swung to the opposite end of the spectrum from the old handshake. Business agreements are complex and highly detailed documents. Without certain details, many contracts and agreements won’t hold up in court, which can lead to trouble if a contract is challenged.  So, just what type of agreement is best for your business?

“Change your agreements as your industry changes. Federal and State regulations change often and in order to mitigate risk, you need to make sure clients are sharing in the liability. Law suits are common in any industry, a strong contract will alleviate you from losing profit due to being relaxed and out of compliance!” says Sharon Tsao, CMO, Contemporary Staffing Solutions.

The Difference Between A Contract, An Agreement and A Master Service Agreement

The terms “contract” and “agreement” are often used interchangeably, but they are not the same. According to Black’s Law Dictionary, an agreement is “a mutual understanding between…parties about their relative rights and responsibilities.” Contracts are defined by Black’s Law Dictionary as “an agreement between parties creating obligations that are enforceable.” Finally, a master service agreement (MSA) is defined as “one legal document that consolidates separate but related agreements between the same signing parties.”

Which One Is Best?

There is no clear-cut answer to which type of contract or agreement is best for your business. However, it is important to note a few key things. First, agreements are often seen as less formal and therefore less enforceable than a contract. Contracts are legally binding and enforceable, but only if they meet specific requirements. Agreements can be drawn up quickly, while contracts can take weeks or even months to hammer out.

Many businesses like MSAs because it allows the parties to more quickly negotiate future agreements and terms on a per-deal basis. Typically, an MSA outlines a business relationship in general terms, focusing on: payment terms, product warranties, intellectual property, liability, and dispute resolution processes. Some may also include terms by geographic location if one or more parties has locations in different states or counties.  MSAs are most used in areas like Human Resources, Marketing and Finance where one company or party is providing open-ended support to another.

When an MSA is in place and new services are added or deals are negotiated, the companies typically draw up agreements like a statement of work or a contract to define that specific service area under the MSA.

Are You Looking For Sales And Marketing Talent?

If you are looking for sales and marketing talent who can help you build solid business relationships, Contemporary Staffing Solutions can help. To learn more about the ways in which CSS can help you achieve your recruiting goals, contact us to start the conversation today