A joint enterprise is an informal relationship between two or more parties in which each party contributes their skill, efforts, knowledge, or money to achieve a common purpose. The joint enterprise is typically limited to a single event or transaction. The basic defining characteristic of a joint enterprise is that the parties share a common purpose which is to be carried out by the group.
The term “joint enterprise” is often used as a synonym for other business arrangements, especially joint ventures and partnerships. However, joint enterprise is a distinct legal concept and is applied in various areas of law, not just business law.
In a joint enterprise, each party may be held liable for the wrongdoings of the other participants. This is similar to the concept of joint liability in the area of tort law. The existence of a joint enterprise is frequently used to establish the shared liability of parties in a criminal law or tort law context.
The main difference between a joint enterprise and a joint venture is the purpose for which the association is formed. In a joint enterprise, the common purpose may be general, such as research, non-profit activities, or leisure activities. The common purpose in a joint enterprise may even be illegal, in which case the actors will share the guilt or liability of others.
In contrast, a joint venture is only formed for business purposes. The parties must have definite business aims in order to qualify as a joint venture, and the venture will terminate once the business goal has been reached.
Compare the following elements that are required for a joint enterprise versus a joint venture:
- An express or implied agreement amongst the members of the group;
- A common purpose that is to be achieved by the group;
- An equal right of control to voice the direction of the enterprise.
- An agreement between the parties
- A joint interest in a common business aim
- A mutual understanding that profits and/or losses will be shared
- A right to the joint control of the venture
As you can see, a joint venture is much more business-oriented than a joint enterprise.
Unlike a joint venture, a joint enterprise is actually not a status conferred on the group. Rather, a joint enterprise is formed based on a contractual agreement between the parties.
Thus, joint enterprises are often regulated by contract laws. Also, a joint enterprise is much more similar to an agency-principal relationship, wherein one party authorizes the other to act on their behalf.
Liability in a joint enterprise is based on the fact that each party acts as an agent of the others. Therefore, any party to a joint enterprise may be held responsible for the negligent acts of any of the other parties.
This is true even if only one party actually committed the negligent act that caused injury to a non-member of the enterprise, so long as the act was done somehow related to the group’s common purpose. Any criminal or negligent act committed within the scope of the enterprise’s purpose will be charged to the others, much like the acts of an employee may be charged vicariously against their employee.
In determining whether a party is actually involved in a joint enterprise, courts may look to the person’s conduct to determine their intent. Joint enterprises are much less formal than a business arrangement- oftentimes a written document is not needed to determine liability.
Joint enterprises are very general associations between persons and can be covered by many different overlapping areas of law. Participation in a joint enterprise can lead to both criminal and civil penalties. Therefore, it is important that you contact a business lawyer for representation if you are facing legal issues in connection with a joint enterprise. If the common purpose of your joint enterprise will be much more business-oriented, you may wish to consider adopting a more formal business structure such as a partnership or corporation.