Master Service Agreements for Fractional CTOs

# Master Service Agreements for Fractional CTOs *by: [Scott Booher](https://www.linkedin.com/in/scottbooher/)* It's common for a Master Services Agreement (MSA) and [[Statements of Work for Fractional CTOs|Statement of Work]] (SOW) to be drafted and executed between myself and clients before work begins. If that engagement is extended or pivoted to other scopes, there may be several SOWs under the 'umbrella' MSA over time. On occasion, business terms which could be included in an MSA may be carved out into separate documents. In my experience, the majority of clients will already have an MSA template that has been vetted through their internal legal team, which can be used as a starting point for an agreement. Starting with the client's MSA template can save substantial time in the process, assuming it doesn't have any deal-breakers within. That said, some startups may not have a template MSA handy. Following are typical sections and business terms found within an MSA for independent/fractional contractors such as myself - this doesn't purport to be legal advice. ### MSA Typical Business Terms | Section | Business Terms | | ---------------------------------------------------------------------------------- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- | | **Primary Control / Relationship of Parties** | Consultant has primary control over how services are performed but must comply with applicable laws. Consultant can provide similar services to others as long as terms of this Agreement are followed. Consultant is an independent contractor, not an employee of the Company. Consultant must provide their own insurance coverage. **My view:** The Primary Control, Independent Contractor Status, Payroll and Workers Comp narratives are necessary to protect the Company from any employer-employee liabilities, such as tax withholding, worker's comp insurance, benefits, etc.. | | **Services to Be Performed** | The Company has engaged Consultant to perform services as outlined in (Exhibit A / SOW #1). Consultant can choose the location and schedule for performing services. Consultant cannot assign or subcontract work without company approval (often) This MSA takes precedence over (Exhibit A / SOW #1) in case of conflict. | | **Term** | May have beginning and ending dates, or may have a beginning date with a reference to Termination provisions later on. **My view:** As this is an umbrella Agreement and there may be multiple SOWs within, it's a good idea to have some room here so as not to force an extension of the MSA if asked to extend the engagement (usually a good thing). | | **Equipment** | Consultant is responsible for providing materials, equipment, and supplies necessary for performing services. Company may agree to provide materials in certain circumstances. | | **Expenses** | The Company is not responsible for any expenses incurred by the Consultant unless agreed upon in writing. Expenses must be approved in advance. Expenses, if permitted, will be billed according to Company's standard practices. | | **Independent Contractor Status** | Consultant is an independent contractor, not an employee of the Company. Consultant agrees to comply with all applicable laws and regulations. The Company is not responsible for any obligations incurred by Consultant unless specifically agreed to in writing. Consultant is solely responsible for their actions and those of their employees and agents. | | **Payroll or Employment Taxes** | The Company will not consider the Consultant or their employees as employees for tax purposes. The Company will not withhold or pay any payroll or employment taxes for payments made to the Consultant. The Consultant will receive a Form 1099 for all payments. The Consultant is responsible for filing and paying all taxes related to their status as an independent contractor. The Consultant agrees to indemnify and hold the Company harmless from any liabilities arising from failure to pay taxes on payments received. | | **Workers Compensation Status etc.** | The Company will not provide workers' compensation insurance for the Consultant or their employees. The Consultant must comply with workers' compensation laws for themselves and their employees. The Consultant and their employees are not entitled to unemployment benefits or other employee benefits from the Company due to their status as independent contractors. | | **Termination Mechanisms & Continuations** | Agreement may terminate automatically upon completion of services, or on a contracted end date. Agreement can be terminated immediately by either party with cause, such as material violation of agreement or exposing the other party to liability (etc). Agreement can be terminated without cause with (x) business days advance notice. Agreement can also be terminated by mutual agreement. Consultant agrees to continue to be bound by any restrictive covenants and existing contractual obligations even after termination of Agreement. **My view:** There is a lot of potential variance in this section, but in general there will always be provisions of the Agreement that continue forward after termination, with Confidentiality provisions being good examples. | | **Confidential Information** | Consultant must not disclose or use any confidential Information obtained during the course of providing services for the Company. Consultant must keep confidential Information confidential, even after termination of services. | | **Indemnification** | Consultant is responsible for any damage or injury related to their performance under the Agreement. Company can recover expenses and fees, including attorneys' fees, incurred to enforce the Agreement. | | **Ownership of IP, Copyrights etc.** | Company retains ownership of its intellectual property. Consultant's work under the Agreement is considered "work made for hire" and all intellectual property rights automatically belong to Company. Consultant agrees to assign ownership of all rights, titles, and interests in the material developed while performing services. Consultant must assist Company in obtaining patents, trademarks, copyrights, or other protections for the developed material, as requested. | | **Warranties** (Can often be a dumping ground for these and similar items) | Consultant must have required knowledge and skills to perform the anticipated services. Consultant must work in a professional manner and comply with Company's specifications, established policies, etc. Consultant must maintain the highest standards in their profession for the services provided. Consultant must comply with all laws, statutes, and regulations pertaining to the services, including data protection and privacy. Consultant must own or have the right to use any materials, specifications, design requirements, information, or data used in providing services. Consultant must have full authority to use these materials in the manner outlined in the Agreement. Consultant guarantees that all deliverables provided to Company will be original work and will not infringe on any third party rights. Consultant must have the necessary licenses for any software used in providing the services, excluding software provided by Company. Consultant must ensure that performing the Services does not breach any duty owed to a third party or violate any confidential information of a third party. Consultant agrees not to disclose or use any confidential or proprietary information belonging to a third party for the benefit of Company. Consultant has not signed any agreements that would interfere with performance of services for Company. Consultant must indemnify Company and its affiliates, as well as their officers, directors, employees, agents (etc) from any demands, claims, losses, liabilities, or damages arising from a breach of warranties. | | **Noncompetition, Nonsolicitation** | Consultant cannot work for a third party in (specific services) that compete with Company without prior approval (or for certain period). Consultant services are considered to compete if they are for a third-party whose primary service offering directly competes with Company. Consultant shall not encourage, support (etc) any employee of Company to terminate employment with Company or violate their working relationship terms for (period) after termination of the Agreement. **My view:** While less common, these provisions can be problematic if the service definition is overly broad for non-competition. | | **Survival** | Usually calls out the sections that will survive Termination of the Agreement, with Payroll or Employment Taxes, Confidential Information, Indemnification and Ownership of IP being typical sections. | | **Severability** | If any part of the Agreement is found to be unenforceable, it may be modified by the court to make it enforceable. If a part of the Agreement cannot be modified, it may be severed and the rest of the Agreement will still be enforceable. | | **Governing Law** | Usually establishes that the Agreement will be governed by laws of the state of incorporation of the Company. | | **Successors & Assigns** | Company's rights and obligations under the Agreement will benefit successors and assigns of Company. Consultant's rights and obligations are (generally) not assignable to others. | | **Payment Terms** | Consultant will be paid an (hourly/weekly etc) rate for services provided. Payment will be based on specific Statements of Work. Hours must be invoiced (frequency) and in compliance with the statement of work. Hours are subject to approval by the Company. Company may withhold payment for incorrectly reported or disputed amounts. Undisputed payments will be made within (number) days after receipt of the statement of Services or expense report. Consultant is entitled to no other remuneration or benefits. **My view:** It's not uncommon for startup firms to seek extended payment terms for all vendors, and I've seen them go out to 90 days. While those extended terms might be fine for a large, well-capitalized vendor, they might not work for a 1-person consultancy. | > [!tip] Contact Scott Booher > > [email](mailto:[email protected]) > >[linkedin](https://www.linkedin.com/in/scottbooher/)