Joint Venture Agreements: An Overview

What is a joint venture agreement?

A joint venture agreement in England and Wales is a contract and business arrangement between two or more parties in which they agree to collaborate on a specific project or venture. The joint venture agreement outlines the terms and conditions under which the parties will work together, share resources, and divide profits or losses.

Some key elements within a joint venture agreement include the following:

• Purpose: The agreement should clearly define the specific goals and objectives of the joint venture. 
• Contributions: Each party should specify their contributions to the venture, which can include capital, assets, expertise, or other resources. 
• Management: The agreement should outline how the joint venture will be managed, including day to day processes and responsibilities. 
• Profit and Loss Sharing: The parties should agree on how profits and losses will be divided among them. 
• Intellectual Property: The agreement should address ownership and licensing of intellectual property created during the joint venture. 
• Term and Termination: The agreement should specify its duration and the conditions under which it can be terminated. 
• Dispute Resolution: The parties should agree on a method for resolving disputes that may arise during the joint venture.

At Expert Commercial Law, we have access to a nationwide panel of specialist commercial law solicitors who are highly experienced in assisting clients with joint venture agreements. If you have any queries before you enter into a joint venture agreement or require legal representation, then please do not hesitate to get in touch with us today.

What are the types of joint ventures?

Joint venture agreements can take various forms, all with their different advantages and disadvantages. It generally depends on the personal and business preferences of the parties involved as to which form their joint venture agreement might take. Some of the more common types include:

Contractual Joint Venture

This type is purely a contractual arrangement where the parties agree to collaborate without forming a separate legal entity. It is flexible, easy to set up, and allows for a limited scope of collaboration.

Company Joint Venture

This type is when an entirely new company and separate entity is formed to carry out the joint venture, with the parties each holding shares in the company. It can provide limited liability protection and allows for a more formal structure.

However, setting up a new company can understandably be more complex, and such a venture requires ongoing compliance with corporate laws, for which you may need the assistance of a specialist commercial solicitor.

Limited Liability Partnership (LLP) Joint Venture

A limited partnership can be created to carry out the joint venture, offering limited liability to its members. This option can combine the flexibility of a partnership with limited liability protection.

However, due to the nature of LLPs, parties may have restrictions on certain types of activities they can undertake or restrictions on ownership structures.

Strategic Alliance

A strategic alliance type joint venture agreement is typically a broader form of collaboration that may involve multiple projects or ventures. It generally allows for flexibility and can be used to explore new markets or technologies.

Consortium

This is when a group of companies come together to undertake a large-scale project. It enables the parties to pool resources and expertise and can be used for complex projects.

Due to the potential number of parties involved in this type of joint venture agreement, it can be challenging to manage and coordinate.

Does a joint venture agreement need to be in writing?

Though there is no legal requirement for a joint venture agreement to be in writing, it is highly recommended to put it in writing as a verbal agreement means there is no evidence of the terms agreed upon and can cause issues if disputes were to arise regarding the agreement.

Advantages of having a written joint venture agreement include:

• Clarity and Precision: A written agreement ensures that the terms of the partnership are clearly defined, minimising misunderstandings.
• Risk Mitigation: It can include provisions to protect the interests of both parties, such as confidentiality clauses and preferred dispute resolution methods.
• Negotiation Tool: A written agreement can serve as a foundation for negotiation, helping parties reach mutually beneficial terms.
• Professionalism: It demonstrates a professional and committed approach to the partnership, building trust and credibility.

How are disputes resolved in joint venture agreements?

Joint venture agreements often include specific provisions to address potential disputes that may arise between the parties. These provisions can help to avoid costly and time-consuming litigation.

Common dispute resolution methods include:

1. Negotiation: The parties can attempt to resolve disputes through direct negotiations, either on their own or with the assistance of representatives.
2. Mediation: A neutral third party, known as a mediator, facilitates discussions between the parties to help them reach a mutually agreeable solution.
3. Arbitration: A neutral arbitrator is appointed to hear evidence, consider arguments, and render a binding decision. Arbitration is often preferred over litigation because it can be faster, less expensive, and more confidential.
4. Litigation: As a last resort, the parties may resort to litigation in a court of law. This can be a lengthy and costly process, and the outcome can be unpredictable.

Many joint venture agreements include a tiered approach to dispute resolution, which requires the parties to try less formal methods before resorting to litigation. The resolution method chosen can depend on the nature and complexity of the dispute at hand.

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

While it is not legally required to instruct a solicitor to draft a joint venture agreement, it can be wise to do so due to the complexities and intricacies of such agreements.

Solicitors have specialised knowledge and experience in drafting legal documents and can ensure that the agreement is comprehensive, legally sound, and tailored to the specific needs of your joint venture.

Additionally, a solicitor can help identify potential risks and pitfalls and incorporate provisions into the agreement to mitigate those risks. For example, a solicitor can draft clear and enforceable confidentiality clauses to protect sensitive business information or include dispute resolution mechanisms to avoid costly litigation.

While it may be tempting to try to draft a joint venture agreement yourself, the potential consequences of errors or omissions can be significant in your business endeavours. Consulting with a commercial solicitor can help to avoid these risks and ensure a successful and legally sound partnership.

How can Expert Commercial Law help?

Expert Commercial Law has a panel of specialist commercial law solicitors who are highly experienced in all areas of joint venture agreements.

All of the solicitors on our panel have the experience and expertise required to take on your case. We only select the best in the business. All of our solicitor firms are authorised and regulated by the Solicitors Regulation Authority (SRA) and offer a range of funding options for your case.

We are not a firm of solicitors; we have a panel of cost effective commercial law solicitors. If you contact us in relation to a commercial law case, we will pass your case onto a panel firm.

Our panel can also assist with commercial issues such as business energy claims, shareholder disputes and contract disputes.