5 Top aspects of a Joint venture contract


An essential step in any joint venture contract is to set out the terms of an agreement. Imagine your real-estate venture. If you were to fix a property in the hopes of selling for a profit, you ‘d have to state how things will be handled if the property fails to sell.

You would also need to determine if both parties will participate in the decision-making process of reducing the selling price.

Your joint venture agreement will be one of the most important legal business arrangements that you carry out over the course of your operations.

There are many different elements in a joint venture contract, but there are a few key aspects that make up all the effective drafts.

Here are five aspects of an effective joint venture contract, if you are interested.

1. State of the relationship

An effective joint venture agreement must commence with a clearly defined relationship between the two parties.

Do partners have fiduciary obligations to each other for example?

Or is this more a contractual agreement, where both parties respect the space of each other?

You don’t want a scenario where one party looks at a prospective opportunity and confusion about letting the other know.

The key aim is to reduce possible future litigations.

The nature of the partners relationship can determine the success of a joint venture contract.

2. Partner input

Knowing unique commitments for each partner is enormous when drawing up the successful joint venture contract.

This is where exactly what each partner is responsible for is spelled out.

Determine who is responsible for day-to-day operations?

Who will be in charge of the marketing duties?

Who come from the financial resources and where are they allocated?

If this is effectively laid out, each party should understand what they are going to commit to the joint venture and ensure that they are each bound by that commitment.

When both partners are aware of each other’s efforts, a joint venture contract is at its most successful.

3. Accessing your profits, risks and liabilities

The successful joint venture arrangement will also address profit sharing, risks and liability sharing.

There are several ways in which to structure how to divide those.

A joint venture incorporated involves the creation of a new company, in which both parties become shareholders.

An unincorporated joint venture requires that both partners enter into a contractual arrangement which explains the sharing division.

A standard partnership involves that both parties are jointly liable to third parties for any partnership acts.

A limited partnership grants one party a limited liability and all others an unlimited liability.

It is necessary to establish how you will share the profits, risks and liabilities

4. Insurance

Another secret to successful joint venture is to cover the joint venture with insurance. Joint ventures can take advantage of several insurance options.

Secondly, under current coverage every participant will insure their own risk.

This is possible when there is a short-term work on a project. Second, one member can insure the entire Joint Undertaking.

Lastly, the joint venture can simply procure its own insurance, providing coverage for all members.

If you want a good joint venture contract, consider procuring the insurance that best fits your needs.

5. Intellectual property IP

Forming a contract for the joint venture covers the valuable intellectual property.

Without a joint venture agreement, there is no formal contract about who owns particular concepts, assets, and property.

Creating an agreement calls for accurate documentation of all contributions.

This provides a protective layer should you ever want to end business endeavors.

In this case, you can leave the joint ventures without fear of stolen or misusing your intellectual property.

Intellectual property rights are an integral provision in an successful joint venture agreement, since there is tremendous value to business security.

In Summary

It can be complex to draw up a Joint Venture contract. Make sure the terms are set out in detailed, consistent conditions in advance.

Set the essence of the partnership to ensure a effective joint venture contract.

Make sure every partner knows what they will be contributing to the venture.

Determine which structure it will take to share profits, risks and liabilities.

In addition, specify a compatible insurance option to protect your joint venture.

When designing an effective joint venture deal, take all of these considerations into account.

Komolafe Timileyin is a passionate entrepreneur that loves to solve entrepreneurial issues. He is also a blogger and an upcoming Engineer.

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