What Is a Master Agreement?

A master agreement is an agreement or contract between two or more parties that acts as a primary agreement between those parties, which can then be amended by other agreements. The idea behind such an agreement is to establish general, overarching terms and conditions for business to be conducted. Future work between the two parties can then utilize smaller agreements that deal with more specific matters while still under the terms and conditions of the larger agreement. A master agreement is often used in labor union negotiations with businesses and for freelance or ongoing work in which new projects are added regularly.

Also called a master contract, a master agreement is often a fairly lengthy and detailed agreement between two parties. This contract sets out a number of terms and conditions between those two parties, such as payment required, methods of accepted payment, and terms by which the parties can settle grievances. Once this master agreement is created and agreed to by each party, then more specific agreements can also be made, which are typically shorter and govern temporary or localized details. These agreements are usually bound to not violate the master contract, but can otherwise set different terms and conditions.

A master agreement is often used in labor union negotiations, especially those that involve collective bargaining and the establishment of terms between national companies and unions. The union representatives meet with lawyers or representatives for a company and agree to major terms, such as minimum pay scale and maximum hours per week that can be worked. Once this master agreement is established, then other agreements can be established by local unions or in individual instances with smaller businesses. Some people criticize the use of such agreements, as they can potentially ignore the local needs of workers, but others defend them as necessary for the establishment of national union power.

Some businesses can also utilize a master agreement between a company and an employee or freelance worker. This is often done for work in which future projects are likely to arise, to keep such projects easier to organize and arrange. A graphic designer, for example, might have a master agreement with a particular company that governs his or her wages and ownership rights of created products. Smaller agreements can then be created and agreed to by each party as new projects come along for the designer to work on, without the need for re-establishing the terms and conditions already covered in the master contract.