Structuring a Lasting Joint Venture Contract

Note: Want to skip the guide and go straight to the free templates? No problem - scroll to the bottom.
Also note: This is not legal advice.

Introduction

The importance of forming joint venture contracts cannot be overstated. Collaboration between business owners and entrepreneurs often requires a great deal of trust, understanding and agreement in order to achieve a common goal. When two parties come together, but don’t have a formal agreement in place to define expectations and obligations, misunderstandings or disputes can easily arise.

This is why it’s important to structure a lasting joint venture contract; one that clearly outlines the roles, responsibilities and rights of each party involved. It should include the scope of the venture, its duration, financial responsibilities and any provisions for protecting intellectual property rights. Doing so helps to create an environment of understanding from the outset - setting expectations for all involved - as well as safeguarding against any potential disputes that could derail progress or worse still cause regretful losses for either/or parties.

At Genie AI, we are dedicated to helping facilitate these kinds of structures with our open source legal template library; currently the world’s largest source of datapoints teaching AI what an effective joint venture contract looks like. Our library enables users to customise document drafts with high quality templates without having to pay a lawyer – making it easier than ever before to get up-and-running with legally-sound agreements in minutes!

When you use our comprehensive guide on how to structure lasting joint ventures (no Genie AI account required!), you will not only understand how consensus differs depending on the topic but also gain confidence in drafting your own documents so that your contracts remain solid whilst aligned with both parties’ interests throughout their collaboration journey! So if you’re looking for step-by-step guidance on structuring lasting joint venture contracts – or want access our free template library today – simply read on below!

Definitions (feel free to skip)

Joint Venture: A business arrangement between two or more parties in which they agree to share resources and profits in order to achieve a common goal.

Purpose and Goals: The objectives and aims of the partnership that all parties must agree on in order to ensure they are all on the same page.

Scope: The limits of the joint venture that provide a clear framework for all parties to work within.

Liability: An amount of money that must be paid for any potential damage or loss incurred.

Risk Management: The methods of managing any potential risks associated with the venture, such as insurance policies.

Profit and Loss Distribution: The percentage of profits and losses that each party is entitled to.

Voting Rights: The rights of each party regarding making decisions.

Decision-Making Processes: The methods by which decisions are to be made.

Communication Protocols: The methods of communication between the parties and the methods used to ensure all parties are kept informed.

Roles and Responsibilities: The tasks that each party is responsible for.

Dispute Resolution: The methods by which any potential disputes are to be resolved.

Termination Conditions: The circumstances under which the joint venture can be terminated.

Duration: The length of time that the agreement will be in place.

Documenting: Outlining all the terms and conditions of the agreement.

Executing: The methods of carrying out the agreement.

Audit Trail: The methods of tracking the agreement and documenting any changes.

Contents

• Establishing the purpose and goals of the joint venture
• Identifying the parties to the joint venture agreement
• Drafting the terms of the joint venture
• Addressing liability and risk management
• Outlining the distribution of profits and losses
• Defining voting rights and decision-making processes
• Establishing communication protocols
• Defining the roles and responsibilities of each party
• Addressing dispute resolution
• Clarifying termination conditions
• Determining the duration of the joint venture
• Documenting the joint venture agreement
• Finalizing and executing the agreement
• Creating an audit trail for the joint venture agreement

Get started

Establishing the purpose and goals of the joint venture

• Identify the purpose of the joint venture and the goals it is to achieve
• Outline the joint venture’s goals, objectives and expected timelines
• Draft an initial agreement that specifies the joint venture’s purpose, goals, structure and roles
• Ensure that all parties to the joint venture understand and agree to the purpose, goals and structure of the agreement
• Review the agreement with each party’s legal representatives, if desired
• Sign the agreement and make copies for each party

You will know you have completed this step when you have an initial agreement that all parties have agreed to and signed.

Identifying the parties to the joint venture agreement

• Identify the parties to the joint venture, including their full legal names, addresses, and contact information
• Establish the roles of each party in the joint venture
• Research and verify the legal authority of each party to enter into the joint venture
• Document any special qualifications or experience that make a party suitable for the joint venture
• When all parties to the joint venture agreement have been identified and their roles and legal authority established, you can move on to the next step.

Drafting the terms of the joint venture

• Outline the specific purpose of the joint venture and the scope of the arrangement
• Establish the contributions and roles of each party, including resources, personnel, and financial obligations
• Specify the duration of the venture, any renewal and termination provisions, and any conditions for dissolution
• Outline the decision-making process, voting rights, and the method for resolving disputes
• Identify how profits and losses will be shared
• Detail how confidential information will be handled
• Describe how and when reports must be submitted

You can check off this step and move on to the next when all of the above points have been adequately addressed in the joint venture contract.

Addressing liability and risk management

• Clarify who is liable for any harm or damages that occur as a result of the joint venture
• Discuss how to manage any risks associated with the joint venture
• Establish a risk management plan that outlines how to address any potential risks
• Create a detailed indemnification clause that outlines the responsibilities of both parties in case of a breach of contract
• Incorporate a liability insurance policy in the contract

Once you have discussed and outlined all the liability and risk management considerations, you can move on to the next step of outlining the distribution of profits and losses.

Outlining the distribution of profits and losses

• Decide how the profits and losses will be divided between the parties involved in the joint venture
• Discuss who will bear the brunt of any losses
• Make sure the terms of profits and losses are clearly stated in the contract
• Assign percentages of profits and losses to each party
• Determine how and when profits will be distributed
• Agree on a reasonable cap to the losses that each party may incur
• Once all terms have been finalized and all parties have agreed to them, include them in the contract
• Once this step is completed and all parties have signed off on the details, you can move on to the next step.

Defining voting rights and decision-making processes

• Establish who will have voting rights in the joint venture, and how much each party will have
• Decide how decisions will be made and who will make the final decision
• Outline the process for resolving disputes, if any
• Include the rules for changing the voting rights and decision-making processes in the contract
• Once all of the above have been established and agreed upon, this step can be considered complete and the next step can be started.

Establishing communication protocols

• Outline the best methods of communication between the two partners, such as email, telephone, or video conference
• Decide how often the two partners will communicate with each other
• Designate any additional methods of communication that may be necessary for the joint venture to be successful
• Agree on how quickly each partner should respond to communications from the other partner
• Determine how any disputes or misunderstandings will be resolved
• When all parties agree on the communication protocols, sign off on the contract.

Once all the communication protocols have been established and agreed upon, you can move on to the next step which is defining the roles and responsibilities of each party.

Defining the roles and responsibilities of each party

• Analyze the contributions of each party and determine the roles that each party will need to play in order to ensure the success of the joint venture
• Outline the duties, responsibilities, and activities that each party is expected to contribute to the joint venture
• Create a schedule of specific deliverables and timeframes for each party
• Draft a written agreement that details each party’s roles and responsibilities
• Have both parties sign the agreement

You’ll know you can check this step off your list and move on to the next step when the roles and responsibilities of each party have been outlined and documented in a written agreement that both parties have signed.

Addressing dispute resolution

• Determine the most appropriate dispute resolution method: Depending on each party’s preference, you may choose to go through a formal arbitration process or a more informal mediation process.
• Draft language outlining the dispute resolution process: Include details on who will run the process, the timeline, and any other relevant information.
• Establish the governing law: Establish which law will be applied to any disputes that may arise out of the contract.
• Outline the consequences of failing to reach a resolution: Clarify the consequences of failing to reach a resolution, such as withholding funds, terminating the contract, or any other penalties.

Once you have addressed dispute resolution, you can move on to the next step.

Clarifying termination conditions

• Identify and specify the conditions that would require the joint venture to be terminated
• Specify the process for terminating the joint venture by each party
• Identify the parties’ obligations upon termination of the joint venture
• Outline the parties’ liabilities upon termination of the joint venture
• Specify the timeline for the termination of the joint venture

You will know you can check this off your list and move on to the next step when you have clearly identified and specified the conditions that require the joint venture to be terminated, the process for terminating the joint venture by each party, the parties’ obligations upon termination of the joint venture, the parties’ liabilities upon termination of the joint venture, and the timeline for the termination of the joint venture.

Determining the duration of the joint venture

• Clarify the timeline for the joint venture agreement, and decide on a start and end date.
• Consider whether the joint venture should be open-ended, or if it should have a fixed duration.
• Discuss the terms of renewal and how they will be managed and documented.
• Put together a timeline of milestones with agreed-upon dates to be included in the joint venture agreement.
• When the timeline and end date are agreed upon, record it in the contract, and move on to the next step.

Documenting the joint venture agreement

• Establish a clear and thorough document that details the agreement between the parties
• Outline the purpose of the joint venture as well as the roles and responsibilities of each party
• Include all financial details such as investments, budgeting, and profit sharing
• Specify the terms and conditions of the joint venture, including its duration
• Clarify the dispute resolution process and the process for terminating the agreement
• Have both parties review the document and sign off on it
• Ensure the document is legally binding and meets all applicable laws

Once the joint venture agreement is documented and both parties have signed off on it, you can proceed to the next step of finalizing and executing the agreement.

Finalizing and executing the agreement

• Have all parties in the joint venture agreement review, sign and date the final agreement
• Have a witness and notary sign the agreement to authenticate the signatures of all parties
• Make sure that all parties receive a copy of the agreement
• Once all parties have signed the agreement, the joint venture contract is officially in effect
• Check off this step when all parties have signed the agreement and all have a copy of the agreement.

Creating an audit trail for the joint venture agreement

• Review each party’s obligations, rights and responsibilities and create a list of documents that will act as an audit trail for the agreement.
• Create a timeline for both parties to provide the documents that are necessary for the audit trail.
• Specify a secure location where documents will be stored and how they can be accessed.
• Ensure that all documents are signed by both parties and stored in the designated secure location.
• Verify that all documents are up to date and all parties are in agreement.
• Check that all documents are in compliance with the agreement’s terms.

You can check this off your list when you have verified that all documents have been provided and stored in the designated secure location, and all parties are in agreement.

FAQ:

Q: Is there a difference between a UK joint venture contract and an EU one?

Asked by Alan on February 16th 2022.
A: In general, the key differences between UK and EU joint venture contracts are related to the enforcement of the contract, the governing law and the dispute resolution process. In the UK, joint venture contracts are generally governed by English law, with disputes resolved in an English court. In the EU, joint venture contracts are generally governed by the law of the country in which the business is registered, with disputes resolved in a court in that country. It is important to note that while some countries may have similar laws governing joint venture contracts, there may be differences in how they are enforced. Additionally, each country may have specific rules relating to joint ventures that must be taken into consideration when creating a joint venture contract.

Q: Are there any key differences between structuring a lasting joint venture contract for a SaaS business vs a Technology business?

Asked by Sarah on April 29th 2022.
A: When structuring a lasting joint venture contract for a software as a service (SaaS) business or a technology business, there are some key differences to consider. For example, SaaS businesses typically provide services to customers on an ongoing basis, so there will likely be different terms for customer payment and support compared to technology businesses which typically sell one-off products or services. Additionally, SaaS businesses need to consider how their services will be delivered and maintained over time, while technology businesses need to consider how their products will be distributed and supported after sale. Both types of businesses should also consider how intellectual property rights will be managed and protected within the contract.

Q: How can I ensure my joint venture contract is effective in the long term?

Asked by John on August 8th 2022.
A: A lasting joint venture contract should ensure all parties understand their rights and obligations under the agreement and provide clarity on how they will work together going forward. It is important to include provisions that protect each party’s interests and ensure compliance with relevant laws and regulations. Additionally, it may be beneficial to outline any dispute resolution processes that may apply if issues arise during the term of the agreement. The contract should also include clear termination provisions outlining what happens if either party wishes to end the agreement before its natural expiration date. Finally, it is important to review the agreement regularly to make sure it remains up to date with any changes in laws or regulations that may apply.

Example dispute

Lawsuits Involving Joint Venture Contracts

• Plaintiff must demonstrate that they and the defendant had a legally binding contract, often referred to as a joint venture agreement, that provided for mutual obligations.
• Plaintiff must demonstrate that the defendant failed to fulfill their obligations as outlined in the contract.
• The plaintiff must then demonstrate that the breach of contract caused the plaintiff to suffer damages.
• Depending on the terms of the contract, the plaintiff may be able to recover the cost of performance, lost profits, and/or other damages (such as court costs, attorney fees, etc).
• The plaintiff may also be able to seek an injunction ordering the defendant to fulfill their obligations under the contract.
• The court may also award punitive damages as a way to punish the defendant for their breach.
• Settlement may be possible and will depend on the agreement between the parties and the damages that have been suffered.

Templates available (free to use)

Equity Joint Venture Contract

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