Joint Venture Contracts Explained

Joint Venture Contracts ExplainedNow some people don’t bother with signing formal joint venture agreements. Some of the biggest JV deals on earth have been agreed on nothing more than a handshake between two businessmen. Other people wouldn’t dream of entering into a JV without a formal contract set down on paper. There’s no right or wrong here. It is up to you to decide which approach you are happiest with. However, just in case you are one of those people who do feel the need for formal contracts I’ll run through what a JV contract should include in this article. In simple terms, a JV agreement sets down the rights, duties and obligations of the participants in a JV. You also might want to use a joint venture agreement to insure you get paid from your JV deal. I’ll show you what can be included by providing an actual example. Please note, I’m not giving you individual legal advice here. I am not a solicitor or a lawyer (neither am I an actor that ‘plays one’ on Television). It’s always sensible to run any contract you’re involved with by your solicitor, and take their professional legal advice just to make sure it suits your individual circumstances.



This joint venture agreement (hereinafter known as the ‘Agreement’) is made on this _____ day of _____________ ___ between : (ABC Ltd) of ___________________________________________________ and (XYZ Ltd) of ___________________________________________________. Clause 1 : General Provisions Term of the Agreement. This Joint Venture shall commence on the date above and will continue in existence until terminated by either party or dissolved by law. Purpose. The business of the Joint Venture shall be as follows: [ Describe what the JV will do here ]. Clause 2 : Definitions The terms used in this agreement are hereby defined as follows: Capital Contribution(s). The capital contribution to the Joint Venture actually made by the parties including property, cash and any additional capital contributions made. Profits and Losses. Any income or loss of the partnership for tax purposes determined by the partnership’s financial year including, without limit, each item of Partnership income, gain, loss or deduction. Affiliate. An affiliate of an entity is a person that directly or indirectly through one or more intermediaries, controls, is controlled by, or is under control of such an entity. Clause 3 : Rights, Duties & Obligations __________ is wholly responsible for all operations and decisions of the Joint Venture and will be compensated for providing various services. Business of the Joint Venture. __________ shall have full, exclusive and complete authority and discretion in the control and management of the business of the Joint Venture for the purposes stated in this agreement and shall make all decisions affecting the business of the Joint Venture. As such, any action taken shall constitute the act of, and serve to bind, the Joint Venture. __________ shall manage and control the affairs of the Joint Venture to the best of its ability and shall use its best efforts to carry out the business of the Joint Venture. __________ shall not participate in or have any control over the Joint Venture business nor shall it have any authority or right to act for or contract the Joint Venture. Clause 4 : Allocations Profits and Losses. Starting on the date stated above and ending on the termination of the business of the Joint Venture all profits, losses and other allocations to the Joint Venture shall be allocated as follows at the end of each financial year: __________ _____% __________ _____% Clause 5 : Expenses All expenses of the Joint Venture shall be paid by _____ and shall be reimbursed by the Joint Venture. Clause 6 : Third Parties & Affiliates Validity of Transactions. Periodically the Affiliates of the parties to this Agreement may be engaged to undertake services for the Joint Venture. The validity of any transaction, agreement or payment involving the Joint Venture and any Affiliates of the parties to this Agreement otherwise permitted by the terms of this Agreement shall not be affected by reason of the relationship between them and such Affiliates nor the approval of these transactions, agreement or payment. Other Business of the Parties to this Agreement. The parties to this Agreement and their respective Affiliates may be involved with businesses other than the Joint Venture business. The Joint Venture shall not have the right to the income or profits earned from such other business interests and, even if they are competitive with the Partnership business, such activities shall not be deemed wrongful or improper. Clause 7 : Indemnity The parties to this Agreement shall indemnify each other against losses, judgments, liabilities, expenses and amounts paid in settlement of any claims suffered by it in connection with the Joint Venture. The parties to this Agreement shall have no liability to the other for any loss suffered which arises out of any action or inaction if, in good faith, it is determined that such course of conduct was in the best interests of the Joint Venture and such course of conduct did not constitute negligence or misconduct. Clause 8 : Termination The Joint Venture shall be dissolved upon the bankruptcy, withdrawal, removal or insolvency of either of the parties; the sale or other disposition, not including an exchange of all, or substantially all, of the Joint Venture assets and the mutual agreement of the parties. Clause 9 : Miscellaneous Provisions Headings. The headings and sub-headings used in this Agreement are used for ease of reference only and shall not control or affect the meaning or construction of any provision of this agreement. Books and Records. The Joint Venture shall keep complete books and records at its place of business showing a true and accurate account of all business transactions arising out of and in connection with the conduct of the Joint Venture. Validity. In the event that any provision of this Agreement shall be held to be invalid the same shall not affect in any respect whatsoever the validity of the other parts of this Agreement. Integrated Agreement. This Agreement constitutes the entire understanding and agreement among the parties involved with respect to the subject matter described and there are no agreements, understandings, restrictions or warranties among the parties other than those set forth herein provided for. Jurisdiction. This Agreement shall be governed by English Law unless otherwise stated. Notices. Except as may be otherwise specifically provided for in this Agreement, all notices required or permitted will be in writing and shall be deemed to be delivered when posted to the parties at their business addresses stated in this Agreement or at any subsequent business address. Other Instruments. The parties hereby agree that they will execute each such other and further documents or instruments as are or may become reasonably necessary or convenient to carry out and satisfy the purposes of this Agreement. Signed for (ABC Ltd): Date: Signed for (XYZ Ltd): Date :


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