Joint Enterprise vs. Joint Venture

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 What Is a Joint Enterprise?

A joint enterprise is generally defined as an informal relationship between two or more parties wherein each party lends their skills, knowledge, assets, funds, and any other resources. This is done as part of a combined effort to achieve a common purpose.

A joint enterprise is typically limited to a single event or a series of transactions towards a common goal or to complete a business project. Thus, the primary trait of a joint enterprise is that the parties combine resources as a group to accomplish a shared purpose.

Although the term “joint enterprise” tends to be used as a synonym for other types of business arrangements, such as a partnership or joint venture, it is important to note that a joint enterprise is a distinct entity. Not only is a joint enterprise its own category of a business relationship, but the term can also be applied in various fields of law other than just business law.

For example, a joint enterprise may refer to a situation in which each party may be held liable for the wrongdoings of other participants. This relationship can come up in areas of law like tort, such as when the parties to a tort lawsuit share joint liability for causing an injury. A joint enterprise can also be seen in a criminal law context as well like when the defendants to a criminal case are charged with the crime of conspiracy (e.g., conspiracy to commit murder).

To learn more about the specifics of joint enterprises and joint ventures in your state, you should speak to a local business lawyer for further legal advice on such matters.

How Is a Joint Enterprise different from a Joint Venture?

The primary difference between a joint enterprise and a joint venture depends on the reason why the parties decided to form the relationship. For example, the shared purpose in a joint enterprise can be an activity that is generic, such as research, leisure activities, or nonprofit acts.

As previously discussed, the common purpose in a joint enterprise may even be an activity that is considered to be illegal like conspiracy to commit murder. In which case, the parties involved in the joint enterprise may be held liable for the actions of the other participants involved.

On the other hand, the term “joint venture” is only used when it refers to a shared business goal amongst two or more parties. For instance, two entities that agree to enter into a joint venture agreement may work towards completing a major business-related project. Once the business project is complete, however, the joint venture will be terminated and the entities involved will return to their own separate businesses.

In order to further understand the differences between a joint enterprise and a joint venture, consider the factors provided for each relationship in the separate lists below:

  • Joint enterprise:
    • Requires an implied or an expressed agreement among the members involved in the joint enterprise;
    • Each member will be granted an equal measure of control over the direction of the mission of the joint enterprise; and
    • The members of the group share a common purpose that is to be achieved by working together.
  • Joint venture:
    • In a joint venture, the parties will normally enter into a contract or form a written agreement;
    • The common purpose in a joint venture must be one that is associated with business matters;
    • A joint venture also usually involves a mutual understanding between the parties that any profits earned or losses suffered will be shared amongst the interested parties; and
    • Each party will typically be granted the right to have joint control over the project or mission of the joint venture.

As may be evident from the above information, a joint venture is much more focused on business-related matters than a joint enterprise. In addition, unlike a joint venture, a joint enterprise is not a status that is conferred upon the members of the group. Instead, a joint enterprise will be based on a contractual agreement created by the parties. As such, joint enterprises tend to be governed by the rules of standard contract law.

Lastly, a joint enterprise is also much more similar to the relationship found in an agency-principal dynamic in which one party authorizes another party to perform actions on their behalf or at their direction.

Who May Be Held Liable in a Joint Enterprise?

As discussed above, the rationale behind assigning liability or guilt to the members of a joint enterprise is based on the fact that each party acts as if they are an agent of all the other members. Accordingly, any member involved in a joint enterprise can be held responsible for the negligent or criminal acts of the other parties.

This rule is true even in situations where only one party of the joint enterprise commits the negligent or criminal act that causes injury to a party who is not involved in the joint enterprise. However, in order for blame or liability to be assigned, the act must have somehow been related to the common purpose of the overall group.

If this fact can be proven, then any criminal or negligent act committed within the scope of the purpose of the joint enterprise will be attributed to the others as well. For example, an employer may be held legally responsible for the tortious actions of an employee under the theory of vicarious liability. Thus, both an employee and their employer may need to pay damages to an injured party in this type of lawsuit.

In deciding whether a party is in fact involved in a joint enterprise or not, a court may assess the conduct of an individual group member to determine their actual intent. Since joint enterprises are often much less formal than a joint venture business arrangement, it is usually not necessary to view the contents of a written document like a contract or agreement in order for the court to make a decision on who should be held accountable in a case.

Do I Need a Lawyer for a Joint Enterprise?

As previously discussed, a joint enterprise often involves a generic connection between parties who share combined resources in order to accomplish a shared endeavor. Thus, joint enterprises tend to be governed and affected by various overlapping areas of law (e.g., business law, tort law, criminal law, etc.). Accordingly, a person who elects to be part of a joint enterprise can potentially face both civil and criminal legal penalties in court.

Therefore, it may be in your best interest to contact a local corporate lawyer for legal representation if you are being charged or sued for legal issues that are related to your participation in a joint enterprise. In the event that the joint enterprise involves a business law matter, you may also want to consider hiring an attorney to form a legally recognized business structure, such as a corporation, limited liability company, and/or general partnership.

Depending on what your joint enterprise issue is, your lawyer will be able to perform legal research and can draft any necessary legal documents for your case. For instance, if your joint enterprise matter involves criminal consequences, then your lawyer may conduct legal research to see if there are any defenses that you can raise against the charges to have them dropped and/or reduced.

On the other hand, if your joint enterprise issue involves a business-related legal matter, then your lawyer can help you file the proper paperwork to register as a specific type of legal entity or can provide legal representation in civil court.

For example, if you are being sued for breach of contract as a member of a joint enterprise, your lawyer will be able to either help you prove that you did not violate the agreement or that a valid contract was never formed in the first place.

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