A Joint Venture Agreement - What to Consider

A joint venture is a commercial agreement or arrangement where two businesses that decide to join forces to complete a venture or project. It is highly recommended to draft a joint venture agreement, which defines all the important information relevant to the joint venture.

In this piece, we look at how a joint venture generally functions and what should be included in a joint venture agreement. We also explore the benefits of making a manufacturing agreement, and some of the disadvantages of a joint venture. Finally, we examine some common joint venture disputes and discuss when you may want to seek assistance from Giambrone & Partners.

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What happens when two parties sign a joint venture contract.

Read why joint venture contracts are made, and when they may be ideal.

Find out what should be considered when making a joint venture contract.

Read the key benefits of making a joint venture contract.

Find out the pros and cons of making a joint venture contract.

Read the common types of joint venture disputes and the steps to take to avoid such disputes.

We answer common queries on making a joint venture contract.

How does a joint venture operate?

A joint venture is often successful when two businesses embark on a joint venture due to having complementary expertise. For example, a technology company may have an innovative concept that they wish to bring to promote and they join forces with a marketing company specialising in the technological sector to assist in exposing the new concept to the market. Similarly, a ride-share company may partner with a car manufacturer so that their drivers have reliable and uniform vehicles, and the vehicle manufacturer enjoys enhanced brand recognition. 

This type of joint venture enables resources and expertise to be exploited that neither party has within its own organisation in the most economic way.  The risks associated with a new venture are limited as a joint venture is frequently a short-term project, with the opportunity for expansion if required.  

Are you considering a joint venture? Find out how we can assist with drafting commercial contracts.

What is the purpose of a joint venture agreement?

A joint venture agreement aims to define the expectations of each party and mitigate the risks of a dispute arising. The contract will set out the expectations of each party and clearly outline how each party is expected to work together to achieve the aims of the joint venture, including where the liability rests and how the finances are to be divided.

This provides complete clarity and limits the potential for misunderstandings about the expectations of each party and gives a defined timeframe for the venture.

What should a joint venture agreement include?

A joint venture contract should include concise clauses making clear what each party should abide by. It should state each party's contribution to the venture and set out the expected time frame to work towards. The contract should also define the management of the joint venture, clarifying where the responsibilities lie. As well as specifying precisely the ownership of the associated intellectual property.

Finally, it should include well-defined dispute resolution clauses, which set out how a dispute should be managed and which jurisdiction litigation should be conducted in should a dispute reach this stage. 

If you are you would like clarification as to what to include in a joint venture agreement Contact us today.

The benefits of a joint venture agreement

A joint venture can be extremely successful as both parties have additional resources enabling them to work towards the success of the venture.

Because each business is contributing its unique skills or resources, there is often a significant cost saving as instructing external agencies is often avoided.

Both parties share the costs and the risks, as well as undertaking the due diligence related to the project. 

What are the disadvantages of forming a joint venture?

It is imperative to be clear on what each party is bringing to the venture to avoid discovering at a later stage that there are some expected skills and resources lacking, resulting in one party contributing more than the other. 

In a "worst-case scenario,"  a poorly defined joint venture can result in the loss of time and money and leads to a legal dispute. 

Disputes can be avoided or minimised by having a well-drafted contract in place. Find out how we can assist you in drafting a commercial contract here.

Joint venture disputes

There are some common joint venture disputes, for example, if there is a disagreement about the provision of certain materials or the ownership of the materials and at which point the materials (such as those used in manufacturing) become the legal property of the joint venture. There are sometimes disagreements over the profit share. Another common dispute is when parties disagree about the future direction that the venture should take, such as whether or not it is acceptable to bring another party on board and who this should be.

Find out how Giambrone & Partners can help you resolve a joint venture contract dispute.

Do you need assistance in drafting a joint venture contract, or dealing with a dispute?

Whether you are drafting a joint venture contract or dealing with a dispute, getting the correct advice is essential. Giambrone & Partners’ skilled corporate and commercial lawyers are highly experienced in resolving contract disputes, so get in touch to see how we could help you.

Frequently asked questions

How do you address dispute resolution in a joint venture agreement?

Ideally, it should already be defined in the joint venture agreement.  If this is not the case, it is strongly suggested that you seek legal advice to begin dispute resolution through mediation or arbitration.

Should joint venture agreements contain warranties?

Warranties should be included in joint venture agreements, when appropriate.

Do you need a separate profit-sharing agreement with a joint venture agreement?

It is not necessary to have a separate agreement if the profit share is clearly defined in the joint venture agreement.

Do you need a solicitor to prepare a joint venture agreement?

It is strongly recommended to seek legal advice to ensure that the agreement is accurate and legally binding.

How do you structure and manage a joint venture?

This entirely depends on the circumstances and the aims of the joint venture. It is essential to plan carefully, communicate openly, and be flexible on what to expect. You must also closely monitor the performance and outcomes of your venture.

What is the difference between a contractual joint venture and a partnership?

A joint venture is when two or more parties come together to work on a project, but a partnership is when individual persons create a combined business. A joint venture is a short-term project, and a partnership is longer term.

Does a joint venture agreement have to be in writing?

The agreement does not have to be in writing; however, it will be extremely difficult to raise breaches without a written contract.  

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