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Contract to Form Joint Venture

A joint venture is a contractual agreement joining together two or more parties for executing a particular business undertaking.  All parties agree to share in the profits and loss of the enterprise.  Joint ventures are usually established by contracts.  The contract may consist of one or more agreements involving two or more individuals or organizations.

A Joint venture status is created by contract, express or implied.  It depends on the mutual intent of the parties.  A joint venture is a relationship voluntarily assumed and arising wholly ex contractu[i].

A joint venture cannot arise by operation of law.  A joint venture can exist only by voluntary agreement of the parties[ii].  The agreement must be to enter into an undertaking.  The intention of the parties must be to create a relationship and in that objective the parties have a community of interest and a common purpose in performance.  Each party to the agreement must have an equal voice in the manner of performance and control of the agencies.  However, one can entrust performance to the other[iii].

Parties in a joint venture stand in the same relationship to each other as partners in a partnership.  A joint venture agreement, like a partnership agreement, is a form of contract.  In deciding the meaning of the terms of the agreement, general rules used in interpreting a contract must be applied.  However, the proper interpretation of a contract is ultimately a question of law for a court to decide[iv].  A joint venture agreement must be construed to effectuate the intention of the parties.  The intention of the parties is evidenced by the language used in the contract.  Courts are bound to enforce the terms of the agreement as set down in an integrated, written instrument.  When the terms of a contract are ambiguous, a court may turn to extrinsic evidence to ascertain the intent of the parties[v].

Most of the states recognize the creation of a joint venture by an oral agreement[vi].

The Statute of Frauds is applicable to joint ventures.  A joint venture not in compliance with the statute of frauds is unenforceable and cannot impose any fiduciary duties upon the parties[vii].  The purpose of the Statute of Frauds is to prevent frauds and perjuries.  The statute prevents fraud by informing the public and judges of what is needed to form a contract.  The statute encourages parties to follow the requirements by nullifying those agreements that do not comply with the requirements.

A joint venture cannot be established merely by evidence of an agreement to share profits.  The mere agreement to share profits tends to show the establishment of a partnership.  Such agreement is not inclusive nor controlling[viii].

Additionally, an agreement forming a joint venture must be specific. The parties’ use of an assumed name, standing alone, is not sufficient to establish a joint venture[ix].

Moreover, a joint venture agreement is void and unenforceable where the purpose of the venture is unlawful.  All wagers, bets, or stakes made to depend upon any race or upon any gaming by lot or chance, casualty, unknown or contingent event is unlawful.  All contracts for or on account of any money or property; or thing in action so wagered; bet or staked is void[x].  Moreover, grounds negating contractual agreement negate a joint venture formed through such agreement.  Grounds usually negating agreements are infancy, fraud, or other legal impediment.

[i] Sullivan v. Jefferson, Jefferson & Vaida, 400 A.2d 836, 839 (App.Div. 1979).

[ii] Global Credit Servs. v. AMISUB, 244 Neb. 681, 690 (Neb. 1993).

[iii] Fangmeyer v. Reinwald, 200 Neb. 120, 131 (Neb. 1978).

[iv] Robbins v. Salem Radiology, 145 N.H. 415, 417 (N.H. 2000).

[v] W.W.W. Assocs. v. Giancontieri, 77 N.Y.2d 157, 162 (N.Y. 1990).

[vi] Shinn v. Edwin Yee, Ltd., 553 P.2d 733, 745 (Haw. 1976).

[vii] Olympic Holding Co., L.L.C. v. ACE Ltd., 122 Ohio St. 3d 89, 98 (Ohio 2009).

[viii] Davis v. Gilmore, 244 S.W.2d 671 (Tex. Civ. App. 1951).

[ix] State v. Houston Lighting & Power Co., 609 S.W.2d 263, 268 (Tex. Civ. App. Corpus Christi 1980).

[x] Peck v. Briggs & canfield, 3 Denio 107, 108 (N.Y. Sup. Ct. 1846).

Inside Contract to Form Joint Venture