If you are considering going into business with another person one of the most valuable documents you can have drafted is a Joint Venture Agreement. You’ve probably heard of this term before, but what exactly does a joint venture detail?
In its simplest form a Joint Venture Agreement is a document used when two or more parties come together to perform a specific business venture.
A good example of this would be the development of a parcel of land into a block of units or apartments. Here a builder would enter into a Joint Venture Agreement with the owner of the land for the development and they would subsequently sell these units and share in the profits.
Using this example the agreement would set out in detail all of the terms of the business venture between the parties, such as the contribution of each party, how much they would borrow and on what terms, how the project would be marketed and the units sold. It would also include specific details about the contribution of each party and the percentage split of the profits on the sale of the units each party would receive.
Further it would also include provisions for where a dispute occurs between the parties and how such a dispute is to be resolved, or if there are problems with councils how these would be overcome, as well as provisions for problems that occur out of the control of the parties, such as a natural disaster.
The idea is to make the agreement as thorough and detailed as possible, so that every situation and variable is included, which provides certainty to each party to the venture.
Having an effective Joint Venture Agreement drafted is an essential element to a commercial transaction between two or more parties.