Joint Venture Agreements
A Joint Venture is a form of a partnership between two or more people or businesses used to carry out a specific purpose. Joint venture agreements in Florida are common among real estate and business investors who pool their resources together for the purpose of acquiring real estate or stock in a company. Although joint ventures are generally seen as less formal than partnerships, each joint venturer is agrees to share profits and losses of the joint venture just like partners do. Additionally, each joint venturer owes certain fiduciary duties to each other just like partners to:
What Duties do Joint Ventures owe Each Other?
- Duty of Loyalty: The duty of loyalty that joint a venturer owes another has been described by Florida courts as one of the “finest and highest” loyalty.
- Good Faith: A joint venturer must act in the best interests of the venture.
- Fairness and Honesty: This especially important where one of venturers is holding property belonging to the joint venture
Beginning and Ending a Joint Venture
A joint venture comes into legal existence at least as early as the date of the written agreement by which the parties agree to form a joint venture for a specified purpose. Like a partnership agreement or any other contract, a contract of joint venture may be terminated at any time by the mutual consent of the parties to it as provided under the terms of the joint venture agreement, or by the execution of a subsequent agreement abrogating the former one. A joint venture may be abandoned or dissolved by conduct inconsistent with its continuance, but the joint venturers continue to owe a fiduciary duty to each other during the winding up process until the venture’s affairs are settled, and the venture is terminated. Where the contract contemplates an enterprise that may continue over an indefinite period because of its continuous character or where the contract contemplates a series of business ventures, such as buying and selling corporate stocks or bonds or real estate and there is no time limit for the continuance of the enterprise, it is usually held that the contract is terminable at will by any party to it or at least that such contract is terminable after a reasonable length of time.
Five Things Every Joint Venture Agreement Should Have
- Be in writing: As with every agreement, it is wise to get any joint venture agreement it in writing and signed by everyone.
- Set out its purpose: A joint venture agreement should always clearly define and outline the purpose for which it is created. For example, Is the purpose of the joint venture to acquire real estate? If so, state what type, under what conditions, and how the real estate is to be acquired.
- Define the duties and responsibilities of every party: Specifically write what each party is responsible for doing under the joint venture. For example, if one party is going to fund the joint venture. How will the profits be divided and when will they be disbursed?
- Customize it: Stay clear from boilerplate agreements that don’t serve your particular purpose and contain terms. An unclear agreement is the subject of many court cases. However, a clear agreement leaves no guessing and will be enforced by the court.
- Anticipate the unexpected: A thoughtful joint venture agreement will include sections for venue, what law will apply, and attorney’s fees provisions should a dispute arise.
How to Protect Yourself
Planning and forethought can help to minimize and eliminate problems down the road.
You should get the opinion of Miami business lawyer before entering into any joint venture agreement. A lawyer can negotiate the terms of the agreement that you want and knows where to be specific in the agreement and where it is advantageous to be less specific.
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