Joint venture contracts are agreements between two or more parties that are entered into in order to accomplish a specific business operation together. In a joint venture, the parties agree to share in the gains and losses of the business enterprise. An example of a joint venture is where to product manufacturers join efforts to sell their products together in a single package.
A contract is needed in order to create a joint venture, since joint ventures must be entered into voluntarily. All parties need to agree to the joint venture terms, and they must express their intent to enter into the specific business relationship.
In order for a joint venture to be valid, the following requirements must be addressed by the parties at the time that they are entering into the joint venture:
- A common interest shared by all the parties
- Rights of all members to govern and direct policies
- Rights to control and manage property that will be used during the venture
- Fiduciary duties between the parties, which usually includes the sharing of profits and losses by all parties
Typically, a joint venture contract will address the items listed above in detail. In addition, the joint venture contract should include the names and contact information of all the parties involved, so that it is clear as to who is a part of the joint venture.
Additional clauses and contract provisions may also be added depending on the needs of the parties. For example, the parties may wish to include a clause stating how legal disputes should be handled (i.e., whether the parties should undergo mediation or file a lawsuit). Legal liability for misconduct during the venture may also be addressed.
By law, joint ventures must be formed by contract, but not all jurisdictions require the contract to be in writing. Some jurisdictions will find a joint venture even with implied contracts, either implied from oral agreements or by the actions of the parties.
However, since even small business ventures can be complicated, it is highly advisable that the parties use a written contract any time they wish to enter into a joint venture. Having a written contract definitely has its advantages because it provides the parties involved with a written record of the contract terms, which makes the agreement much clearer for everyone involved. Also, in the event of a lawsuit, the written contract can be used as evidence during the course of trial.
Lastly, like any other contract, joint venture contracts are subject to requirements of the statute of frauds (i.e., certain contracts need to be in writing, such as when the contract deals with the sale of land).
Joint venture contracts are an essential, necessary part of any joint venture, as they are required by law. If you plan on entering in a joint venture, you may wish to hire a business lawyer to help you in drafting and reviewing the joint venture contract. Also, if a legal dispute arises over the joint venture contract terms, your lawyer can help you file a lawsuit in a court of law.