MSP Contracts: Key Terms, Best Practices, and Mistakes to Avoid
FEB 28, 2025 | LAST UPDATED ON FEB 28, 2025 BY ANGELICA NAIDU
What happens when an MSA (Master Service Agreement) is in place, but a client’s delays impact deliverables? Or wouldn’t it be a dreamy situation if every business deal was done over a coffee? Imagine the reduced paperwork and time saving that would bring!
Even the most promising partnerships can be strained by ambiguous terminology and unclear expectations, leaving both sides caught in unnecessary confusion. If there was an easy way to take this headache away, that would have been wonderful – in fact, there is: the MSP (Managed Service Provider)contract.
Every aspect of the services provided must be documented. It is essential for ensuring smooth operations and preventing misalignment. A well-structured MSP contract makes future collaborations easier and, most importantly, ensures honesty and transparency between both parties. Clear and structured agreements set the foundation for successful long-term partnerships, helping us deliver value efficiently while protecting our scope of work.
As the managed services market is expected to grow from $297.20 billion in 2024 to $878.71 billion by 2032, well-defined contracts will continue to drive sustainable growth. The logic, the math, and experience all point to one thing—having a solid MSP contract in place.
Now, let’s break down what goes into these agreements and how they differ from other documents used in client relationships.
Know the Term: A managed services agreement (MSA), also known as a managed services contract or management service agreement, is a contract that a client and a managed services provider (MSP) enter into. The services the MSP will offer, the minimum response time, the payment schedule, and liability protection are all outlined in the contract.
Contracts between a managed service provider and their client are known as managed service provider (MSP) contracts. An MSP contract is a formal document that outlines the services the provider will offer to the client and the terms both parties have agreed upon in a business venture involving business or IT services.
MSP agreements and contracts detail the terms and conditions of the service and the obligations of each party. This makes sure that both parties are aware of their responsibilities and expectations. These agreements have the following advantages:
- Clearly defining roles to prevent miscommunications
- Lowering the risks and potential conflicts
- Guaranteeing adherence to legal and regulatory mandates
Whatever you need related to your partnership you should include in your contract. This includes help desk support, network security monitoring, IT management, data backup, and recovery. A key part of MSP contracts is the Service Level Agreements (SLAs), which specify the quality of service the MSP will provide and the consequences if they fail to meet those standards. They are also crucial for determining the terms of payment, invoice frequency, payment deadlines, and service costs.
Check out free MSP proposal templates here.
Why Do MSPs Need Contracts?
Managed service provider contracts are necessary to safeguard companies and guarantee that customers receive the services they sign up for.
A well-designed and crafted MSP contract can offer legal protection as well as marketing advantages. It not only saves you on the legal front, but it also aids in appropriate negotiation and client relationship management. Having clear contracts helps mitigate many of the problems associated with client relationship management. Let’s go into greater detail about the significance of MSP contracts:
- Clearly define the scope of work: MSPs can determine what services will be offered to the client and the extent of the work with the aid of contracts. This not only saves you from future troubles but also provides a proper path for the project.
- Boost professionalism: In the world of business, professionalism is the key to success. Contracts show that we take our obligations seriously and conduct business in a professional manner.
- Prevent disagreements: Handling contracts has become easier with MSP contracts. This establishes mutual expectations and offers a structure for handling conflicts, saving both parties from running into problems.
- Assure prompt payment: Agreements specify payment terms and provide MSPs with options if customers fail to pay for services received. To avoid payment disputes, ensure that the client understands the due dates and payment structure.
- Reduce liability: MSPs can reduce their liability for errors, omissions, and other issues by using contracts.
Tip: Setting clear expectations will help you avoid confusion in the future. From the beginning of the project, establish defined roles, responsibilities, and service levels upfront. Don’t hesitate to do this.
Following is a draft format of an MSP contract:
Managed Services Contract
This contract, effective [Date], is entered into by:
Service Provider: [Legal Name], [Address], [Contact Information].
Client: [Client Legal Name], [Address], [Contact Information].
Services Provided
Payment Terms
Structure: Monthly, Annual, or One-off.
Billing Schedule: [Specify frequency].
Duration & Termination
Effective from [Start Date] to [End Date]
Confidentiality & Security
Liability & Indemnity
SLA & Penalties
Response Time
Uptime Guarantee.
Intellectual Property
Ownership rights: [Specify].
Client granted [Specify] license.
Dispute Resolution
Mediation first; arbitration/legal action in [Location] if unresolved.
Signatures
Managed Services Provider (MSP): [Name]
[Title]
[Signature]
[Date]
What kinds of MSP contracts are there?
Different types of MSP contracts are:
1. SLA, or Service Level Agreement
An MSP SLA is a written agreement between you and your customer. An essential component of any MSP client relationship is a Service Level Agreement (SLA). It clearly outlines the client’s and MSP’s expectations for the quality of service to be rendered.
An SLA document is typically divided into several categories based on the priority level of submitted support requests. It also defines a minimum response time and a time-to-resolution value.
For example, a server outage that disrupts critical business operations could be classified as a “severity one” issue. In this case, the MSP may contractually agree to a minimum response time of one hour and an expected resolution time of eight hours.
2. Statement of Work (SOW)
This SOW contract included in a specific service offering, deliverable, or implementation such as SLAs, minimum requirements, and exclusions are clearly documented in the Statement of Work (SOW). SOWs are used to sell new services or modify existing ones over the course of a client relationship.
They are usually used in conjunction with a Master Services Agreement (MSA) for first time client onboarding and engagement.
SOW specifies the precise tasks that an MSP must complete for a given project. It is usually employed for one-time tasks like network installations or software upgrades. By using an SOW, it is possible to ensure that there are no misconceptions or disagreements about the scope of work and that both parties are aware of the precise deliverables and deadlines for the project.
3. The MSA, or Master Service Agreement
One of the first contracts to be established as an MSP is the Master Service Agreement (MSA). This outlines the responsibilities of both your client and yourself as an MSP.
There is no one size fits guide for all states and industries, and Master Service Agreements are usually created on an individual basis.
An MSA describes the conditions of your partnership with the client, including retainer fees, project specifications, billing, and other contractual and legal information.
It does not include important details like precise costs or the range of services offered that are covered in supplementary documents like the Scope of Work (SOW) and the Service Level Agreement (SLA). The MSA primarily lists the general responsibilities and liabilities of both parties.
Essential Elements of an MSP Contract
To make sure that both parties are aware of their rights and responsibilities, it is crucial to incorporate a few essential elements into your MSP contract. Here are some important factors to consider:
Participants
You have the client and yourself, of course, but what about any outside vendors you are expected to manage on the client’s behalf, such as line-of-business (LOB) software vendors, phone vendors, or print/copy vendors? You should provide a detailed breakdown of all parties involved and their relationships.
Scope of Services
What kinds of services do you offer? Which devices do you cover? Which services do you not offer? Which devices are excluded? What resources, access, etc. Do you need the client to provide? It is crucial to consider all these questions. Be very clear about the services you do NOT offer.
Location
Are on-site services included, or are only remote services covered? What is the hourly rate for any on-site work if it is not included? Which client locations are covered? Are employees working from home entitled to on-site visits? Address all location-related concerns.
Mode of Operation
Describe how customers can submit service requests and escalate issues. Also, outline the preferred method of payment and the frequency of payments for services.
Privacy
Respect your client’s privacy. You can give them assurance that you recognize their concerns. You are required to maintain confidentiality regarding their data and business practices.You should also include provisions for compliance with local laws and data protection regulations such as GDPR or HIPAA.
Legal Provisions
This clause is essential for the contract’s effectiveness and enforcement. Consulting an attorney is recommended, as this section may vary depending on your specific circumstances.
Procedure for Signing
A simple method for the client to sign the contract should be included. The lengthy process of sending a document to the client for them to download, sign, and scan back could delay contract execution.
Service Level Agreements (SLAs): Metrics and Penalties
SLAs help in setting goals for response times, system availability, and turnaround times.
Intellectual Property Ownership
Clarify ownership rights over intellectual property created during the contract term. Specify whether ownership is retained by the client the MSP or shared.
Dispute Resolution Methods
Your MSP should outline dispute resolution procedures, such as arbitration, mediation, or legal action(Make it all clear for future)
Pro Tip: Protecting your data with strong confidentiality clauses will help keep sensitive information secure. Clearly define what is confidential and make sure proper security measures are in place.
What is the duration of the contract? What are your normal operating hours? What are your company holidays? What SLAs do you have for resolution, response time, etc.? Also include cancellation terms and any late fees if applicable.
Duration and Revision Frequency of MSP Contracts
The duration of an MSP contract varies based on the client’s and MSP’s needs. Several factors influence this duration, including the client’s requirements, the services provided by the MSP, and the MSP’s ability to continue delivering those services over an extended period.
There are mainly two types of MSP contracts:
- Short-term contracts: These contracts are used for short-term requirements and typically last one year or less. For example, a client may need an MSP’s assistance for a six-month software installation project. In such a case, a short-term contract would be the best option.
- Long-term contracts: These are multi-year agreements between the client and the MSP. They are commonly used when a client requires ongoing IT support and maintenance services.
Before signing a contract, both parties must carefully evaluate their needs and expectations to ensure the agreement aligns with their goals and establishes a solid foundation for a successful collaboration.
Tip: Watch for hidden fees and understand all costs to prevent billing surprises down the road.
| Contract Type | Pros | Cons |
|---|---|---|
|
Long-Term
|
Stable income, cost savings, optimal service, loyalty |
Resource tie-up, difficult exit, client power, inflexible |
|
Short-Term |
Builds trust, flexible, lower risk, easy management |
Limited assessment, low investment, high marketing costs, low trust |
MSPs should regularly review and update their contracts with clients, vendors, and SaaS providers. The frequency of these updates depends on the company’s needs and the services provided. As a general rule, contracts should be reviewed annually, with special attention given to clauses that may cause issues or negatively impact business relationships.
If a contract contains outdated service offerings, contract language, or payment terms, it may be time for an update. Keeping contracts clear and up to date helps maintain transparency and efficiency.
Maintaining a record of agreements with customers and suppliers is essential for preventing misunderstandings and ensuring compliance with regulations.
This approach ensures that contracts remain secure and that customers receive the best possible services. For contract updates, consider using online contract templates like Super Proposal and seeking legal advice from an MSP contract expert.
Read more: How to write a contract proposal?
Best Practices for Managing MSP Contracts
- Auto-renewing contracts :Make sure for consistent revenue and minimize renewal negotiations, which is crucial if selling the business in the future.
- Annual price increase clause:You should safeguard against inflation and vendor cost hikes, keeping contracts profitable. Make use of an MSP pricing calculator to track and plan expenses.
- Optimal contract duration (3 Years): Easier to sell, locks in terms, and prevents yearly renegotiations.
- Define lock-in: MSAs should set clear expectations and foster strong, long-term client relationships.
- Avoid old equipment issues: Protect your business from disruptions caused by outdated technology.
Why Super Proposal Is The Best Software For Creating MSP Contracts
Although contracts can be drafted manually, using specialized software simplifies the process. The solution for your problem is Super Proposal, designed to streamline contract generation and organization. It helps businesses create legally compliant and professional contracts with minimal effort. Why Super Proposal for your MSP contract:
- Customizable templates – Industry-specific templates enhance professionalism and make document creation more efficient.
- Client collaboration – Clients can review contracts in real-time, provide feedback, request changes, or approve terms directly within the platform.
- E-Signatures – Built-in e-signature functionality enables fast and secure approvals, accelerating contract finalization and service initiation.
- Tracking and analytics – Gain insights into client interactions, such as when a contract was opened and how much time was spent on different sections, helping businesses understand client priorities and interests.
- Affordable pricing – Super Proposal provides all premium features in a single affordable pricing plan of $19.90 per user per month.
Check our contract templates here.
FAQs
What is an MSP contract?
An MSP contract is an agreement between a business and a managed service provider, where the MSP agrees to provide specific services like IT infrastructure management. It gives you clarity and manages expectations for a long-term business relationship.
Why are MSP contracts important?
They secure recurring revenue, protect against misunderstandings, and establish clear roles, responsibilities, and dispute-resolution protocols. A clear contract will also position your MSP better in the market compared to those relying on verbal agreements.
What are the main types of managed services contracts?
The main types are Master Service Agreements (MSAs), Service Level Agreements (SLAs), and Statements of Work (SOWs). An MSA defines general obligations an SLA states specific deliverables and an SOW highlights services and requirements.
What essential items should be included in an MSP contract?
Key elements you need including liability and confidentiality clauses, payment terms, response times, remote access policies, force majeure clauses, and clearly defined parties involved.
Where can I find MSP contract templates or examples?
Super Proposal is the answer you are searching for. Having MSP proposal templates on hand can save you a great deal of time and effort and a proposal software like Super Proposal can add flavor.
Super Proposal is a single cloud-based solution that helps streamline the entire proposal creation and closing process. It allows you to track sent proposals, receive notifications on client activity, analyze client engagement for future strategies, and more.
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