Frequently Asked Questions
You need to check the relevant legislation in your State and Territory, as the rules are different in each jurisdiction.
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Is a joint venture restricted to two participants?
- No. A joint venture is not restricted to two participants.
- The number of participants in a joint venture is unlimited.
- In practice it can be difficult to effectively govern a joint venture involving many participants with different and competing interests.
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What is my liability as a participant in a joint venture?
- The extent of liability is to some degree defined by the terms of the joint venture agreement.
- The liability of an individual or business in a joint venture is different to that of a partnership for example. The liability of a participant in a joint venture is described as ‘several’ rather than ‘joint and several.’
- In a partnership joint and several liability means that any or all of the partners can be liable for the full amount of compensation or debt owed by any one or more of the partners. For example if one partner went bankrupt one or more or the solvent partners may be liable for any business debt accumulated by the insolvent partner.
- This is different to the ‘several liability’ of a participant in a joint venture. Several liability means that one person’s liability can be 'severed' from that of the group. You would generally only be responsible for the debts and liabilities accumulated by yourself or your business and not those accumulated by other participants.
- There may be an exception to this in the case of public liability. If your joint venture results in a public claim for example if a member of the public was injured by an activity of the joint venture then any or all of the joint venturers may be held liable for some or all of the compensation to be awarded.
- You can use our Phone a Lawyer service for a preliminary legal consultation if you think you may need legal advice.
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What is the difference between a joint venture and a partnership?
- A partnership is different to a joint venture although the distinction can be tricky to establish in practice.
- A partnership usually involves one or more parties carrying on a business together with the view to profit jointly. To ‘carry on’ a business implies some element of continuity and repetition of certain actions or tasks. Joint ventures are usually one off projects that produce a product, strategy or some sort of intellectual property that is then sold by the participants at the end of the venture. They are usually not ongoing businesses aimed at continual profit.
- However even though the general law may consider your arrangement a joint venture and not a partnership it may still be treated as a partnership for tax purposes. This will depend on the circumstances of your particular arrangement.
- Because there is no settled legal definition of a joint venture it is open to construction in each different circumstance.
- You can use our free and anonymous Ask a Lawyer service if you have a particular issue you want to know more about.
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How are disputes in a joint venture resolved?
- Joint ventures are governed by contract law. Contracts can be established by conduct, through verbal communication or by written agreement.
- In the case of joint ventures the terms and conditions are usually contained in a joint venture agreement. The agreement will set out the rules for resolving disputes.
- These rules may include compulsory alternative dispute resolution such as mediation.
- The contract may set out specific remedies for breach of certain clauses of the agreement and remain silent on the issue of alternative dispute resolution.
- Arbitration is often used to resolve disputes. Arbitration involves the handling of any disputes or disagreements by an independent third party. Arbitration is a faster way of resolving disputes than court proceedings.
- It is usually preferable to attempt to resolve disputes out of court. Court can be costly and time consuming and in most circumstances is considered a last resort option.
- You can use our Fixed fee Quote service to call for tenders from experienced lawyers who may be able to assist you with your dispute resolution needs.
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What are the main benefits of a joint venture?
- There are many advantages that may flow from participation in a joint venture. These will depend on your particular business and what goals you are trying to achieve by joining with other businesses.
- Some of the more commonly stated advantages include:
- combining resources to increase capabilities;
- combining to increase market dominance to win a bid for a large commercial project;
- increased access to new markets;
- technological advantage;
- project risks can be shared;
- liability of each participant to other participants is generally several rather than joint and several;
- your business maintains its independence; and
- ownership of property that you contribute for use in the joint venture remains yours.
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What are the rights and obligations of participants in a joint venture?
- This sort of relationship gives rise to a series of rights and obligations. For example both participants would be obliged not to profit from the joint venture without the other venturer's consent and not to obtain a collateral advantage because of their participation in the joint venture without consent. There are correlating rights associating with these obligations.
- Your rights are usually contained in the joint venture agreement although some additional rights may exist.
- One of the most common examples is where a fiduciary relationship has arisen between parties. A fiduciary relationship means that both participants have a duty to act in each other's best interests.
- You may have the right to have the other participants account for any benefit that they have obtained without your consent for example.
- The scope and nature of these duties will be defined by the particular circumstances surrounding your agreement. They will vary from case to case.
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