Joint Venture Agreement
A joint venture agreement is an agreement that governs the relationship between two persons who come to work together with a common goal and forms a partnership for the same.
Parties involved:
- First party
This could be an individual, a company, or a group of individuals and/ or companies entering into a formal relationship with the second party.
- Second-party
This could also be an individual, a company, or a group of individuals and/ or companies entering into a formal relationship with the first party. There may be more parties – third-party, fourth-party, etc. – depending on the nature of the relationship.
Essentials of a joint venture agreement
Objective
A joint venture agreement should include the objective for entering into the agreement – what is it that you wish to achieve through this agreement.
Individual contributions
It should specify the individual contributions of each party whether in terms of monetary contributions, assets, expertise, etc.
Roles and responsibilities
It should include each party’s functions, duties, and responsibilities towards the joint venture.
Confidentiality
It should define what information is to be considered as sensitive and confidential. It should also call out the degree of precautions to be undertaken by the recipient in maintaining confidentiality.
Term and termination
It should mention the term or duration of the partnership and should also lay down the mechanism for termination, as and when required by any of the parties.
Compensation
It should specify whether compensation would be paid by a specific formulation or would be based on profit distribution as per the level of each party’s contribution.
Dispute resolution and governing laws
It should explicitly mention the State and jurisdiction of courts and applicable law if any dispute arises in case of any dispute arising out of this agreement. Preferably it should be as per your place of residence. You can also include an option for arbitration to amicably settle any disputes without having to go for litigation.
Why do you need a Joint Venture agreement?
- Transparency
A Joint Venture gives you an opportunity to share resources, in the form of capital, technical skills, market knowledge, or expertise. Through a Joint Venture Agreement, everyone knows who is bringing in what to the table. This helps in building more confidence and trust amongst the parties. - Clarity
A Joint Venture Agreement clearly lays down the roles and responsibilities of each party. This helps avoid any miscommunication and conflicts and also enhances productivity and efficiency.
- Accountability
It being a legal document with clear mechanisms in place for breaches and disputes, can enhance the accountability of the parties and ensures that everyone follows the terms of this agreement.
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Are you one of these?
- A company looking to strengthen a long term relationship with someone
- A business owner looking to collaborate with someone on a short term project
- An individual looking to work with someone as partners
Do you relate to any of these statements?
- As a business owner, I have a unique business model
- My joint venture requirements are peculiar to my business
- I wish to protect my trade secrets
- I want to avoid future legal and financial complications