The emergence of companies requiring in-depth Oilfield Service Agreements or Master Service Agreements (“MSA’s) has been a large shift in how business is done in the oilfield sector. MSAs help avoid contractual disputes and reduce the risk of litigation by establishing the basic terms of the relationship between an oil and gas company and an oilfield services company for all future goods and/or services sold between the parties. Once completed, MSA’s permit quick negotiations of job specific terms (or “commercial terms”) such as price in a work order/purchase order or in a quote/RFP without needing to re-negotiate the liabilities (or “legal terms”) each time. Working without an MSA can leave both parties open to risks they hadn’t thought through, having to resort to the expensive court system or far worse, learning that their company agreed to the other party’s hidden “terms and conditions” unknowingly.
An MSA can be an overwhelming document with several difference clauses. Here are 10 important aspects of an MSA that help to ensure that your business interests are protected:
1. Payment Terms
When do you get paid (or pay) and how? What if one side disputes the charges?
2. Liabilities (Damage to people and property)
If something goes wrong on a job and people or property are hurt, who is responsible?
How much insurance does each party have to carry and what does it cover?
4. Quality and Inspections; Health and Safety Requirements
What are the standards that must be met pertaining to drugs and alcohol, environmental and health and safety policies and compliance with inspection standards and codes? What happens if they aren’t met?
5. Ownership and Use of Intellectual Property
Who owns the rights to the ideas, techniques and processes being used on the job?
6. Delays, Warranties and Completion of Work
What is the cost and liability for non-productive time, delays, defective products, and equipment failure?
7. Management of Disputes
Where and how are disputes settled?
What happens if the other party shares your confidential documentation, pricing, ideas or trade secrets?
9. Trade Compliance and Ethics
What are the rules for entertaining customers, giving gifts, dealing with government officials and selling goods and/or services in other countries?
10. Termination of Services
What happens if the relationship sours unexpectedly or if one party hasn’t complied with the agreement between the parties?
One of the most challenging aspects to negotiating and drafting MSA’s revolves around understanding and preserving the relationship between the oil and gas company and the service company while balancing the risks for both parties. At Collins Thomas, we take great pride in leveraging our industry experience as former in-house legal counsel for a multi-national oilfield service company to assist our clients in negotiating these MSA’s as cost effectively and timely as possible while preserving the relationship between the parties. Don’t risk working without a properly negotiated contract.
Give us a call today at 587.393.5220 to learn more about our oilfield contract negotiation and management services.