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Distinction Between Joint Venture and Joint Enterprise

A joint venture is an association of two or more persons to carry out a single business enterprise for profit, for which purpose they combine their property, money, effects, skill, and knowledge[i].

On the other hand, a joint enterprise is an informal association of two or more persons usually limited to a single transaction in which the participants combine their money, efforts, skill, and knowledge for gain, with each sharing in the expenses and profits or losses[ii].

A joint enterprise signifies a legal relationship between two or more parties that imposes the responsibility upon each party for the negligent acts of the others while acting in furtherance of their common undertaking[iii].

The doctrines of both joint venture and joint enterprise liability share their roots in partnership law[iv].  The elements of joint ventures and joint enterprises are essentially the same, with the distinction that joint ventures apply to business ventures while joint enterprises do not[v].

The elements of a joint venture are[vi]:

  • an agreement,
  • a joint interest in a common business,
  • an understanding that profits and losses will be shared, and
  • a right to joint control.

However, the elements essential to a joint enterprise are[vii]:

  • an agreement, express or implied, among the members of the group;
  • a common purpose to be carried out by the group;
  • a community of pecuniary interest in that purpose among the members; and
  • an equal right to a voice in the direction of the enterprise, which gives an equal right of control.

Thus, a joint enterprise is not the same as a joint venture and is not governed by the rules applicable to a joint venture[viii].  A business relationship is needed for a joint venture but not for a joint enterprise[ix].

Also, sharing of profits and losses is not listed as one of the essential elements of joint enterprise[x].  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.

Similarly, a joint venture exists where there is[xi]:

  • contribution of resources by both parties;
  • joint proprietorship and control over the subject matter of the property engaged in the venture;
  • sharing of profits by express or implied agreement; and
  • an express or implied contract showing joint venture.

However, a joint enterprise exists where there is[xii]:

  • a mutual undertaking for a common purpose; and
  • a right to a voice in the direction and control of the means used to carry out the common purpose.

Both requirements must be shown, otherwise there is no joint enterprise[xiii].

The courts have applied the theory of joint enterprise in automobile cases and have also been recognized in medical negligence cases[xiv]. The control required for imputing negligence under a joint enterprise theory is not actual physical control, but the legal right to control the conduct of the other with respect to the prosecution of the common purpose[xv].

Joint enterprise liability makes each party thereto the agent of the other and thereby holds each responsible for the negligent act of the other.  In Blackburn v. Columbia Med. Ctr. of Arlington Subsidiary, 58 S.W.3d 263, 271 (Tex. App. Fort Worth 2001), the court held that a medical center and a radiology group is deemed to share a general common purpose of providing radiological services for the center’s patients, for the purpose of establishing a joint enterprise in a patient’s malpractice action against the center for the group’s negligence.

However, sharing the costs of accomplishing a common purpose does not render the parties’ respective interests in that purpose community in nature for purposes of establishing a joint enterprise, since the parties should share or hold in community a pecuniary interest in the relevant common purpose.

In the commercial business law context, the term joint enterprise is loosely synonymous with the terms joint venture and joint adventure, or generally describes a relationship that is either a joint venture or partnership[xvi].

When a joint enterprise is used to describe a business or commercial undertaking, it has been used interchangeably with the term joint venture and courts have not drawn any significant legal distinction between the two[xvii].

Further, a joint enterprise is not a status created by law but is a contractual relationship of mutual agency employed to represent a unity between persons in pursuit of a common purpose, as a result of which the negligence of one member of the unity may be imputed to another[xviii].

In Holliday v. Bannister, 741 P.2d 89 (Wyo. 1987), the court held that by limiting the doctrine of joint enterprise to those having a business or pecuniary purpose, it avoided the imposition of a basically commercial concept, derived from the law of partnership and principles of agency, to non-commercial situations which are more often matters of friendly or family cooperation and accommodation.

Thus, the doctrine of joint enterprise applies to situations which were merely matter of friendly or social cooperation and accommodation where the reason for placing liability is not the same as if they are engaged in business or a commercial venture[xix].

Since the doctrine of joint enterprise derives from the principles of agency and partnership law, the law considers that each associate is the agent or servant of the others, and that the act of any one within the scope of the enterprise is to be charged vicariously against the rest[xx].

Under the joint enterprise rule, courts impute liability to one who was not an active wrongdoer but who is so closely connected to the wrongdoer to warrant the imposition of vicarious liability[xxi].

[i] Price v. Halstead, 177 W. Va. 592 (W. Va. 1987).

[ii] Roethke v. Sanger, 68 S.W.3d 352 (Ky. 2001).

[iii] Seaway Prods. Pipeline Co. v. Hanley, 153 S.W.3d 643 (Tex. App. Fort Worth 2004).

[iv] Blackburn v. Columbia Med. Ctr. of Arlington Subsidiary, 58 S.W.3d 263 (Tex. App. Fort Worth 2001).

[v] Cullip by & Through Pitts v. Domann by & Through Domann, 266 Kan. 550 (Kan. 1999).

[vi] Ramirez v. Long Beach Unified School Dist., 105 Cal. App. 4th 182 (Cal. App. 2d Dist. 2002).

[vii] St. Joseph Hosp. v. Wolff, 94 S.W.3d 513 (Tex. 2002).

[viii] Blackburn v. Columbia Med. Ctr. of Arlington Subsidiary, 58 S.W.3d 263 (Tex. App. Fort Worth 2001).

[ix] Mellett v. Fairview Health Servs., 634 N.W.2d 421 (Minn. 2001).

[x] Blackburn v. Columbia Med. Ctr. of Arlington Subsidiary, 58 S.W.3d 263 (Tex. App. Fort Worth 2001).

[xi] Beehner v. Cragun Corp., 636 N.W.2d 821 (Minn. Ct. App. 2001).

[xii] Mellett v. Fairview Health Servs., 634 N.W.2d 421 (Minn. 2001).

[xiii] Yant v. Woods, 353 Ark. 786 (Ark. 2003).

[xiv] Dang v. St. Paul Ramsey Medical Center, Inc., 490 N.W.2d 653 (Minn. Ct. App. 1992).

[xv] Slaughter v. Slaughter, 93 N.C. App. 717 (N.C. Ct. App. 1989).

[xvi] First Pub. Corp. v. Parfet, 468 Mich. 101 (Mich. 2003).

[xvii] Jeld-Wen, Inc. v. Superior Court, 131 Cal. App. 4th 853 (Cal. App. 4th Dist. 2005).

[xviii] Holliday v. Bannister, 741 P.2d 89 (Wyo. 1987).

[xix] Id.

[xx] Maselli v. Ginner, 119 Idaho 702 (Idaho Ct. App. 1991).

[xxi] Esquivel v. Murray Guard, Inc., 992 S.W.2d 536 (Tex. App. Houston 14th Dist. 1999).

Inside Distinction Between Joint Venture and Joint Enterprise