Contracts are everywhere in our modern business world. However, we may not always see them; or as in the latest 63-page scroll-through on that music service app, we may choose to outright ignore them. Nevertheless, terms and conditions float around us in the digital ether and now replace the handshake deals and gentlemen’s understandings that carried most businesses through the 1900s, giving rise to the current legal landscape for contract disputes. For businesses large and small, having a master agreement as a starting point for the provision of goods, services or other matters of a commercial nature is an important step in protecting both parties in a way that still allows for flexibility.
Courts typically default to what the parties have reduced to writing in rendering decisions resulting from a contractual dispute. Those terms falling within the four corners of a written page are given precedence over any other alleged agreements that are not signed off on in writing by the parties’ authorized agents. Not reading those terms, or even having them at all, places both sides at a severe disadvantage when things go awry through the actions of a party or from outside forces. Having a concise set of basic terms in a master agreement – be it for internet services, food delivery, the sale of bulk fishing lure components, or whatever it is that a company is in the business of doing – provides foresight, familiarity, and a framework for a relationship and avoids defaulting to commercial codes or common law which both parties may not know about.
Master agreements help set out the basic terms of a contractual relationship, and good ones provide ample information on both parties concerning what will be provided by each under the contract, the expected timeframe, terms around the products or services, and means of payment and completion of the relationship. Additionally, terms relating to contact and legal notice, along with plans for remedying any conflicts or unexpected situations, help navigate any forays into uncharted waters which the parties didn’t anticipate. Supplementing the seller-buyer relationship, a good master agreement sets out the terms of how the parties react to unforeseen circumstances, which recently have grabbed front page headlines, from acts of God such as pandemics influencing labor markets, to acts of war by over-aggressive governments slowing supply chains, to acts of cyberterrorism affecting digital infrastructure.
Make a Statement
Perhaps the greatest strength of a master agreement comes in its flexibility and governance of any number of Statements of Work, commonly referred to in both business and legal realms as an “SOW.” Beyond the boilerplate expectations in the main document, an SOW allows the parties to hammer out minutiae for the transaction. An SOW also lets both parties expand on the spirit of a master agreement and get down to business, working within the guardrails of the contract, and continuing to do so from an order-to-order or a project-to-project basis. As each unique need arises, the parties can execute a new SOW referencing back to their master agreement to keep the business relationship rolling with an air of familiarity.
Through the one-two combination of master agreements and SOWs, a company can show that it is serious about its work, protecting not just its own business, but evidencing that it cares about its customers’ businesses as well. Putting those terms front and center at the outset of a relationship gives both parties an understanding of expectations. It also builds a solid foundation which allows for flexible construction of their interactions in the future through mutually-agreed upon SOWs. In this new world of scroll-through terms and uncertain times, consider the use of a master agreement which can be negotiated with every customer, and the addition of SOWs for each project. The consideration of both documents by the parties with the investment of just a few minutes now, is worth far more than the hours of frustration and expense that could result from an otherwise-avoidable dispute occurring down the road without them.
Simonson is an attorney with the Fryberger Law Firm focused on employment, labor, corporate and contract law.