A Master Service Agreement Without a Task Order May not Make a Contract

A Master Service Agreement Without a Task Order May not Make a Contract

Master Service Agreement, Basic Ordering Agreements, or other contracts which call for multiple task orders, project orders or similar structures may not actually be an agreement without those task orders. Many creative professionals and even other companies often use Master Service Agreements or other similar agreements that provide a framework for a business relationship. The Master Services Agreement describes the relationship, i.e. how invoicing will work, when intellectual property rights may transfer, dispute resolution procedures and other general “boilerplate” terms. Often the parties will use task orders to describe the work to be done, the schedule for delivery, pricing, and other obligations specifically related to a given project. Some such relationships may have many overlapping task orders in process at any one time.

I often counsel creative professionals such as web designers or marketing professionals to use these kinds of contract frameworks for their long term clients. While contractual arrangments such as these provide maximum flexibility for the parties, in the absence the task orders, there may not be an actual contract between the parties. In a recent decision from the United States District Court for the District of Maryland, the Court, noting a lack of applicable law on the subject, ruled that a Master Services Agreement without the task orders may lack the elements of mutuality, that is a bargained for exchange of goods, services, or money, necessary to have a proper contract. Citing a case from the United States Circuit Court of Appeals for the Federal Circuit, Modern Sys. Tech. Corp. v. United States, 979 F.2. 200, 203-04 (1992) agreements similar to Master Services Agreements provide a framework but “contractual relationships will arise only after an order is placed.”

In essence, this arrangement is an agreement to agree, a set of ground rules as it were, and no obligations are assumed by either party until orders are given by the Government and accepted by the contractor. In other words, the basic agreement of itself is not a contract, and does not become a contract except to the extent that orders are issued under it.

So the takeaway is simple; despite the fact that a Master Services Agreement may contain signatures and look a lot like a contract, it may not be an enforceable contract in the absence of a task order.

The full opinion of the Court is here: Dynport Vaccine Co. LLC v. Lonza Biologics, Inc., No: JKB-14-2921 (Maryland U.S.D.C., April 30, 2015 ) PDF.