Negotiating MSAs: A Guide for Pakistani Service Companies

A Pakistani software house, BPO, or engineering-services firm landing its first large foreign customer will usually be handed a master services agreement drafted in Delaware or London, forty pages long, and presented as non-negotiable. It is negotiable. More importantly, several of its central assumptions do not map onto Pakistani law at all, and a supplier that signs without understanding the mismatch takes on risk it cannot see. This briefing, current to July 2026, covers the three battlegrounds that decide most MSA negotiations — liability, intellectual property, and scope discipline — and gives you a negotiation table to take into the call.

Why the liability clause reads strangely under Pakistani law

The MSA's liability architecture is usually imported wholesale from common-law drafting practice: a cap at twelve months of fees, an exclusion of indirect and consequential loss, and a list of uncapped carve-outs. Under Pakistani law each element behaves a little differently than the drafter assumed.

Damages for breach of contract are governed by sections 73 and 74 of the Contract Act 1872. Section 73 confines recovery to loss that naturally arose in the usual course of things, or that the parties knew, when they contracted, was likely to result — and it expressly excludes remote and indirect loss. In other words, part of what the customer's "consequential loss" exclusion tries to achieve, the statute already does. That is not a reason to delete the clause; if the contract is governed by foreign law the statutory backstop disappears, and even under Pakistani law a clear exclusion avoids argument. It is a reason not to bleed in negotiation over wording the statute largely covers anyway.

The cap itself is a limitation of liability agreed between commercial parties, and Pakistani courts have generally given effect to such allocations of risk in business-to-business contracts [case law — TO BE VERIFIED BY REVIEWING LAWYER]. But no cap will protect against liability for fraud — section 17 of the Contract Act defines it and no drafting excludes it — and you should assume the same for deliberate wrongdoing.

Where suppliers get hurt is the carve-out list. Customers routinely demand that breaches of confidentiality, data protection, and IP indemnities sit outside the cap. For a services firm, those are precisely the risks most likely to materialise, and an uncapped data-breach indemnity can exceed the company's net worth. The realistic negotiating position is a super-cap: carve-outs capped at a multiple — two or three times the general cap — rather than uncapped. Most sophisticated customers will accept this; they ask for unlimited liability because suppliers keep granting it.

One more point on section 74. If the MSA contains service credits or fixed sums payable on missed service levels, Pakistani law treats any named sum as a ceiling on recovery, with the court awarding reasonable compensation up to that figure. Well-drafted service-credit regimes state that credits are the sole and exclusive remedy for the service failures they cover. Insist on that sentence. It converts an open-ended damages exposure into a priced, predictable one.

Intellectual property: the default rules are not what your customer thinks

Foreign MSAs typically declare that all deliverables are "work made for hire" owned by the customer on creation. That is a US copyright concept. Under the Copyright Ordinance 1962, the default position depends on the relationship: works created by an employee in the course of employment generally belong to the employer, but works created by an independent contractor belong to the contractor unless copyright is assigned, and an assignment must be in writing signed by the assignor [precise section references — TO BE VERIFIED BY REVIEWING LAWYER]. A "work made for hire" recital may therefore fail to move title at all. If you are the supplier, this cuts both ways: it gives you a technical argument you will never actually want to run against a paying customer, and it exposes you if your own subcontractors or freelancers have not signed written assignments up the chain. Audit that chain before you warrant ownership of anything.

The negotiation that matters more is background IP and reusable components. A services firm's real asset is its accumulated toolkit — libraries, frameworks, deployment scripts, internal accelerators. An MSA that assigns "all work product" to the customer, read literally, hands over that toolkit piece by piece with every engagement. The standard fix is a three-way split: the customer owns project-specific deliverables on payment; the supplier retains all background and pre-existing IP plus generic improvements to it; and the customer receives a broad, perpetual licence to background IP embedded in the deliverables. Also resist assignment of deliverables "on creation" — tie the transfer of title to payment, so an unpaid invoice leaves you holding the strongest bargaining position you will ever have.

Open-source deserves a named clause rather than silence. Customers increasingly demand warranties that deliverables contain no copyleft-licensed code. Do not sign that warranty on faith; sign it after running a scan, and qualify it by reference to a disclosed list.

SOW discipline is where the money is actually lost

MSA negotiations concentrate on liability and IP, but the losses services firms actually suffer come from statements of work. The MSA is the constitution; the SOW is the budget. Three habits protect you.

First, make the order of precedence explicit and make the MSA win. Customers' project managers will happily insert unlimited-liability language or IP grabs into an SOW template that legal never reviews. A clause stating that SOW terms cannot amend the MSA unless both parties expressly say so closes that door.

Second, define acceptance mechanically. An SOW that says deliverables are subject to "customer approval" gives the customer an indefinite option not to pay. Specify acceptance criteria in the SOW, a review window of ten or fifteen business days, deemed acceptance if no rejection notice arrives, and a rule that use in production constitutes acceptance.

Third, refuse free scope. Every change — to requirements, timeline, dependencies, or customer-side inputs — goes through a written change-order procedure with priced impact before work continues. The Pakistani instinct to absorb "small" changes to preserve the relationship is how a profitable engagement becomes a loss-making one, and it also destroys your record if the relationship later turns into a dispute. On evidence, remember that if the contract ends up before a Pakistani court, contemporaneous written records — signed change orders, acceptance certificates, delay notices — decide cases; oral understandings with a project sponsor who has since left the customer decide nothing.

The MSA negotiation table

Clause	Their ask	Your counter
Liability cap	12 months' fees, uncapped carve-outs for confidentiality, data, IP	Cap at 12 months; carve-outs subject to a super-cap of 2–3x; fraud alone uncapped
Consequential loss	Broad exclusion in their favour only	Mutual exclusion; note s.73 Contract Act already bars remote loss if Pakistani law governs
Service credits	Credits payable plus damages	Credits are sole and exclusive remedy for the failures they address (s.74 makes named sums a ceiling anyway)
IP in deliverables	All work product owned by customer on creation, "work made for hire"	Customer owns project deliverables on payment via written assignment; supplier retains background IP with licence to customer
Background IP	Silent, or swept into "work product"	Defined, listed where possible, expressly retained; improvements to background IP stay with supplier
Warranties	Unqualified non-infringement and no-open-source warranties	Warranties qualified by knowledge and by a disclosed open-source list, backed by an actual scan
Indemnities	Supplier indemnifies for all third-party claims	Indemnity limited to IP infringement and confidentiality breach, subject to the super-cap, with conduct-of-claim rights
Acceptance	"Subject to customer approval"	Objective criteria per SOW, fixed review window, deemed acceptance, production use = acceptance
Changes	Customer may direct changes; pricing discussed later	No work on changes without a signed, priced change order
Termination for convenience	Customer terminates on 30 days, pays only accrued fees	Payment for work in progress, non-cancellable commitments, and a wind-down fee on early termination
Governing law and forum	Their home law and courts	Negotiate arbitration at a neutral seat; a foreign court judgment may be hard to enforce against either side in Pakistan
Payment	Net 60–90, right of set-off	Net 30, set-off only for undisputed amounts, suspension right for invoices 30+ days overdue

What this means for you

Read the customer's MSA as a map of where their lawyers expect the money to move, then negotiate the four points that decide real outcomes: a super-cap instead of uncapped carve-outs, retention of your background IP with title to deliverables passing on payment, deemed acceptance, and a change-order rule with no exceptions. Fix your own house first — written IP assignments from every employee and freelancer — before warranting ownership to anyone. And run every SOW through the same review the MSA got, because that is where the terms you negotiated quietly get unwound. Our technology practice negotiates these agreements for Pakistani suppliers on both the customer paper and our own templates, and the pattern is consistent: the suppliers who negotiate from a marked-up position get most of what they ask for.