31 Jul Joint Venture 101
Joint Venture agreements take on many forms and can include multiple parties, but one thing remains the same, if the parties involved do not have all the details of their agreement in writing misunderstandings are more likely to occur and as a result, disputes. Typically another party or parties are relying on the smooth operation of the venture and if this doesn’t occur the entire purpose of the project is frustrated.
One great way to protect against misunderstandings and disputes when under taking a Joint Venture is to be extremely specific in the scope of activities along with the limitations to those activities and the decision making power that lies with each party.
A Joint Venture Agreement should outline very clearly what the purpose of the venture is, what the duration of that venture will be and how the parties will handle making decisions that may change the predetermined scope of the project. A few questions to consider with regards to the scope of the Joint Venture Agreement are:
- What activities does the Joint Venture expressly intend to do or refrain from doing?
- What are the existing and potential future conflicts with each party’s business ventures that are not covered under the scope of the Joint Venture Agreement?
- What happens if the parameters of the original scope are changed and who makes decisions with regards to any unexpected changes to the scope?