Most of an MSA is boilerplate that never gets tested. A handful of clauses are the ones that actually decide what happens when something goes wrong: a missed deadline, a data breach, a founder who built the product before the company owned the rights to it. This is a walk through those clauses, what they allocate and to whom, and the statutory basis behind each one.
Key takeaway
Five clauses decide most Indian services-contract disputes: limitation of liability (caps exposure, but an unconscionable cap can be struck down), indemnity (no statutory ceiling, negotiated rather than assumed), IP ownership (the developer owns the code by default unless the contract assigns it, outside a narrow photograph/film exception), termination (convenience termination does not exist unless the contract creates it), and acceptance criteria (defines when done triggers payment).
Limitation of liability: why no cap means unlimited exposure
Indian courts start from freedom of contract under the Indian Contract Act, 1872: parties can allocate risk however they negotiate it. That freedom has limits. Courts have refused to enforce liability caps that are arbitrary, unconscionable, imposed under real inequality of bargaining power, or set so low relative to the actual exposure that the cap effectively nullifies the remedy altogether. Clauses trying to exclude liability for fraud or wilful misconduct get particular scrutiny and are frequently unenforceable regardless of the contract's wording.
A contract with no liability cap at all doesn't default to a safe, reasonable position. It defaults to unbounded exposure. A cap allocates that risk to a specific number both sides can plan around; the absence of one leaves it open.
Indemnity: the clause with no statutory ceiling
This article is general information, not legal advice. If you need advice for your specific situation, contact Buildwright directly.
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Legal extract
A contract of indemnity is a contract whereby one party promises to save the other from loss caused to him by the conduct of the promisor himself, or by the conduct of any other person.
— Section 124, Indian Contract Act 1872
Unlike a liability cap, which courts will strike down if it's unconscionable, there's no statutory ceiling on indemnity scope or quantum. Indemnity obligations get enforced largely as negotiated. That's exactly why a one-sided indemnity clause, one that indemnifies only the drafter's side, or one scoped so broadly it captures ordinary business risk, is a common trap for whichever party doesn't push back on it during drafting.
IP ownership: the Copyright Act default nobody expects
This is the single most consequential, most misunderstood clause in a services MSA, and it runs backward from what most founders assume.
Legal extract
The author of a work shall be the first owner of the copyright therein.
— Section 17, Copyright Act 1957
There's a narrow commissioned-work exception under Section 17(b): where a photograph is taken, a painting or portrait drawn, an engraving made, or a cinematograph film produced for valuable consideration at someone else's instance, that commissioning person is the first owner, in the absence of an agreement to the contrary.
Section 17(b)'s exception is a closed, narrow list: photographs, paintings and portraits, engravings, and cinematograph films. It does not cover commissioned software, written content, a logo, a web design, or any other typical services-business deliverable. For everything outside that list, the general rule applies: the person who wrote the code or built the deliverable owns the copyright in it by default, even though the client paid for it, unless the contract expressly assigns ownership to the client.
Contrast this with employment. Section 17(c) already defaults ownership to the employer for work made under a contract of service, so an employment agreement's IP clause is confirmatory: it closes edge cases rather than establishing the default from zero. A services MSA with an independent contractor or agency has no such default in the client's favour outside the narrow Section 17(b) list. The assignment clause is carrying the entire weight here. A founder who has already handled employee IP correctly can still get this wrong on the vendor or contractor side, because the two situations don't run on the same default.
Termination for convenience vs for cause: neither exists unless you write it in
Termination for cause requires a breach: non-payment, non-delivery, a material violation of contract terms. Termination for convenience lets either side exit without alleging any wrongdoing, typically against a notice period. Termination for convenience is not a default doctrine of Indian contract law. It exists only if the contract expressly creates it. Absent an express convenience-termination clause, walking away from a contract unilaterally without cause is a breach, and it exposes the terminating party to damages.
Even where a convenience-termination clause exists and gets validly exercised, the Supreme Court in Indian Oil Corporation Ltd. v. Amritsar Gas Service held that compensation for losses can still be payable. A convenience-termination clause is not automatically a liability-free exit for whoever invokes it.
Acceptance criteria: how to stop a project stalling on "is this done"
Acceptance criteria define when a deliverable is deemed complete, and when the payment and warranty clocks start. A deemed-acceptance mechanism, common in technology contracts with formal acceptance testing, typically triggers acceptance automatically if the customer fails to reject within a stated testing window, or if the deliverable goes into live or production use before formal sign-off. Without a defined acceptance mechanism, the most common failure mode in an Indian SOW is a dispute over whether a milestone was "done" at all, which stalls payment and leaves neither side a clean trigger for the next phase.
Vendor paper: the one-sided clauses buyers sign without reading
Founders sign vendor and supplier agreements far more casually than customer-facing ones, often on the assumption that the vendor's standard-form paper is neutral. It usually isn't. Four one-sided patterns show up often enough to name specifically.
Aggressive liability caps favouring the vendor: vendor paper routinely caps the vendor's own liability at the value of the order, with no carve-out for gross negligence, IP infringement, or data damage. Accepting this as-is puts the cost of a catastrophic vendor failure onto the buyer.
One-sided or absent indemnification: vendor paper frequently skips any obligation for the vendor to defend the buyer against a third-party claim arising from the vendor's own product, leaving the buyer to bear legal costs for a problem the vendor caused.
Hidden auto-renewal clauses: a narrow cancellation window before automatic renewal, easy to miss, locking the buyer into another full term on the existing, possibly outdated, commercial terms.
Undefined or vendor-favourable breach: termination language that doesn't clearly define what counts as a breach, or gives the vendor sole discretion over cure periods, effectively converts a for-cause termination right into a for-convenience right that only the vendor holds.
Any vendor that touches customer personal data on the buyer's behalf carries this risk one step further: DPDP liability for a vendor-caused breach stays with the Data Fiduciary, the buyer, regardless of which side actually caused it. That flow-down obligation belongs in the vendor contract itself, written down, rather than left as an assumption.
The payment-terms trap: a 90-day clause does not beat a 45-day statute
If your MSA sets a 90-day, 60-day, or any payment term longer than 45 days with a supplier that is Udyam-registered, that clause is not void, but it cannot legally extend your real payment deadline past 45 days from acceptance. Section 15 of the MSMED Act 2006 caps the payment period at 45 days from acceptance where a written agreement exists. Section 16 attaches compound interest, three times the RBI-notified bank rate, monthly rests, for late payment, and does so notwithstanding anything in any agreement or law to the contrary. The Supreme Court in Silpi Industries v. Kerala State Road Transport Corporation confirmed the MSMED Act overrides conflicting contract terms. A buyer who pays on day 90 believing they complied with their own MSA is, as a matter of law, already on day 46 of statutory default, and the interest has been accruing since then regardless of what the MSA says. The full mechanics are in our dedicated post, MSME 45-Day Payment Protection Explained; a supplier on the other side of a late payment can start with our MSME delayed-payment demand notice template.
No. It does the opposite. A contract with no liability cap defaults to unbounded exposure rather than a safe or moderate position. A cap allocates a specific, negotiated number both sides can plan around.
Buyers of goods or services from an Udyam-registered MSME supplier must pay within 45 days of acceptance (or 15 days if there's no written agreement), or face compound interest at 3x the RBI-notified bank rate with monthly rests — a penalty that overrides any contract clause to the contrary.