Contracts and agreements are an important part of risk management. In this video, you’ll learn about service level agreements, memorandums of understanding, non-disclosure agreements, and more.
If you’re working with a service provider, you may want to set certain requirements for uptime or availability. And you can integrate those requirements into a document called a Service Level Agreement, or SLA. This allows you to set minimum terms for the service that’s provided by the third party. For example, you might have certain requirements when you’re entering into a contract with an internet service provider.
For example, you might want no more than four hours of unscheduled downtime. If there is downtime, you’d like a technician to be dispatched, and you might even agree to keep equipment on site by the ISP in case your equipment was to fail. All of this can be written into the service level agreement so that both parties understand the exact requirements for service levels between the two companies.
If you’re entering into a partnership with a third party, you might want to start with a Memorandum of Understanding, or MOU. These generally provide very broad goals of what the two organizations will accomplish by working together. This might also include confidentiality statements so that both sides only discuss this between each other until a later time. This is also something that is very informal. It’s not a signed contract. It’s more of a broad overview of how two organizations might work together in the future.
What might come next in this partnership is a Memorandum of Agreement, or MOA. This is one step above the MOU. And it describes in more detail the relationship between the two organizations. This document provides more detail about how two companies may work together with each other. And it may have some legally binding information within the document. But this is not a contract, and generally, it’s not something that provides any legal enforceable of the information inside the MOA.
If you’re going to have an ongoing relationship with a third party, you might want to create a Master Service Agreement, or MSA. This master service agreement is a legal contract that sets the terms between both organizations. And it sets up a framework that can be used for additional work that might occur in the future. For example, the MSA might include the terms for the service. There might be an overview of the billing and describe how the payment system might work.
This is often used as a foundation that additional services will use going forward between the two companies. Those additional services would be documented in a work order or a statement of work. This statement of work often includes a detailed breakdown of exactly what services will be provided and when. This is often used in conjunction with the MSA so that we don’t have to renegotiate all of the basic terms of the contract and can instead focus on this particular set of tasks.
A common statement of work would have the scope of the job, the location that this particular job will take place, the deliverables schedule, and a list of exactly what is expected during this service. This is a valuable document for both entities because it describes in detail what the expectations might be. And if there’s any question at the end of the service, if something was done or not done, you can always refer back to the statement of work to see if that was covered.
There may be times when information shared between two organizations needs to be confidential. One way to contractually agree of this confidentiality is through the use of an NDA, or Non-Disclosure Agreement. An NDA allows both organizations to speak freely about trade secrets or other business activities without the worry that information will get into the hands of someone else. Anything that you need to keep confidential will go into the details of the NDA.
The NDA can be written so that only one party is required to maintain confidentiality. We refer to that as a unilateral or one way NDA. But many NDAs are written so that both parties must maintain confidentiality. That is a bilateral or mutual NDA. Or if more than two parties are involved, it would be a multilateral NDA. This is a formal contract, and it’s expected that both parties will sign this contract before discussing the terms that are associated with this NDA.
If you’re entering into a formal partnership with a third party, you may want to create a Business Partners Agreement, or BPA. This describes the financial details associated with the agreement and describes what type of ownership stake is acquired as part of this agreement. But this might also describe how the business will work with this partnership in place. For example, who in the partnership gets to make the business decisions? That information is documented in the BPA.
This BPA is also valuable for detailing what happens when things go wrong. For example, what if there are financial issues between the partners? Or what if there is a disaster that shuts down the business? How does that affect the partnership? All of this should be documented and agreed to as part of the business partners agreement.