A joint venture is an association of two or more persons based on contract who combine their money, property, knowledge, skills, experience, time or other resources in furtherance of a particular project or undertaking, usually agreeing to share the profits and the losses and each having some degree of control over the venture[i].
However, no exact definition could be given of a joint venture. The answer in each case depends upon the terms of the agreement, the acts of the parties, the nature of the undertaking, and other facts[ii].
Whether a joint venture exists is a question of fact to be decided according to the facts and circumstances of each case[iii]. Generally, the object and the motive behind a joint venture are the anticipated profits derived from a specific business enterprise[iv].
The essential elements of a joint venture are[v]:
- a community of interest in the purpose of the joint association;
- a right of each member to direct and govern the policy of conduct of the other members;
- a right to joint control and management of the property used in the enterprise; and
- a sharing in both profit and losses.
However, none of these elements alone are sufficient[vi].
Thus, a joint venture exists when two or more persons combine in a joint business enterprise for their mutual benefit with an understanding that they are to share in the profits or losses and each to have a voice in its management[vii].
A condition precedent for its existence is a joint proprietary interest in the enterprise and right of mutual control.
A contract between the parties is necessary for a joint venture but need not be embodied in a formal agreement; it might be inferred from the facts, circumstances, and conduct of the parties[viii].
A joint venture is an enterprise jointly undertaken, an association of such joint undertakers to carry out a single project for profit; that the profits are to be shared, as well as the losses, though the liability of a joint adventurer for a proportionate part of the losses or expenditures of the joint enterprise may be affected by the terms of the contract[ix].
Also, there must be a contribution by the parties to a common undertaking to constitute a joint adventure as well as a community of interest and some control over the subject matter or property right of the contract[x]. However, the contributions of the respective parties need not be equal or of the same character, but there must be some contribution by each co-adventurer of something promotive of the enterprise.
Further, merely sharing an economic interest is not sufficient to form a joint venture. There must be some evidence of the parties participating and having control over the enterprise[xi].
Whether the parties to a particular contract have thereby created as between themselves, the relation of joint venturers or some other relation depends upon their actual intention, and such relationship arises only when they intend to associate themselves as such. This intention is determined by the courts in accordance with the ordinary rules governing the interpretation and construction of contracts.
The requisite criteria for the existence of a joint venture are[xii]:
- A contract between two or more persons;
- A juridical entity or person is established;
- Contribution by all parties of either efforts or resources;
- The contribution must be in determinate proportions;
- There must be joint effort;
- There must be a mutual risk vis-a-vis losses;
- There must be a sharing of profits.
The joint adventure relationship is a fiduciary one in which the members owe each other a high degree of good faith[xiii]. Each member of a joint venture acts for himself as principal and as agent for the other members within the general scope of the enterprise.
The law of partnership and of principal and agent underlies the conduct of a co-adventurer and governs the rights and liabilities of co-adventurers and third parties as well[xiv].
However, a joint venture differs from a general partnership since it is related to a single transaction, while a partnership usually is related to a general and continuing business. Also a joint venture is of a shorter duration and the agreement is less formal[xv].
Similarly, a joint enterprise is not the same as a joint venture and is not governed by the rules applicable to a joint venture[xvi]. A business relationship is needed for a joint venture but not for a joint enterprise[xvii].
Also, sharing of profits and losses is not listed as one of the essential elements of joint enterprise[xviii]. The elements required to establish a joint enterprise, as distinguished from a joint venture, do not require proof of the sharing of profits and losses.
[i] Pittman v. Weber Energy Corp., 790 So. 2d 823 (Miss. 2001).
[iii] Royer v. V.P. Pierret Constr. Co., 834 So. 2d 1078 (La.App. 3 Cir. Oct. 28, 2002).
[iv] Coffee Bay Investors, L.L.C. v. W.O.G.C. Co., 878 So. 2d 665 (La.App. 1 Cir. Apr. 2, 2004).
[v] Thompson v. Hiter, 356 Ill. App. 3d 574 (Ill. App. Ct. 1st Dist. 2005).
[vi] King v. Modern Music Co., 2001 OK CIV APP 126 (Okla. Ct. App. 2001).
[vii] Pittman v. Weber Energy Corp., 790 So. 2d 823 (Miss. 2001).
[ix] Grendell v. Ohio EPA, 146 Ohio App. 3d 1 (Ohio Ct. App., Summit County 2001).
[x] Summers v. Hoffman, 341 Mich. 686 (Mich. 1955).
[xi] Ritter v. BJC Barnes Jewish Christian Health Sys., 987 S.W.2d 377 (Mo. Ct. App. 1999).
[xii] Coffee Bay Investors, L.L.C. v. W.O.G.C. Co., 878 So. 2d 665 (La.App. 1 Cir. Apr. 2, 2004).
[xiii] Summers v. Hoffman, 341 Mich. 686 (Mich. 1955).
[xiv] King v. Modern Music Co., 2001 OK CIV APP 126 (Okla. Ct. App. 2001).
[xv] Thompson v. Hiter, 356 Ill. App. 3d 574 (Ill. App. Ct. 1st Dist. 2005).
[xvi] Blackburn v. Columbia Med. Ctr. of Arlington Subsidiary, 58 S.W.3d 263 (Tex. App. Fort Worth 2001).
[xvii] Mellett v. Fairview Health Servs., 634 N.W.2d 421 (Minn. 2001).
[xviii] Blackburn v. Columbia Med. Ctr. of Arlington Subsidiary, 58 S.W.3d 263 (Tex. App. Fort Worth 2001).