Joint Venture Contract

Joint Venture Contract

I do not say this lightly, with the amount of money that is involved in such deals nothing can be signed off on by a simple hand shake or a verbal agreement. It must be a purpose prepared document, known as a Joint Venture agreement, which is formalised by a lawyer for your deal and for the parties involved and outlines each party’s responsibility and role in the project prior to you starting the deal. Each party must sign, date and witness it, and each party must get a signed copy and keep it in a safe place. Legal documents are there to protect both parties and minimise misunderstanding and miscommunication, which is why they are so essential.

Below is a list of questions that need to be covered in the Joint Venture agreement:

  • Joint Venture structure?
  • Roles, duties and responsibilities of each party?
  • Value of house as is (this will need to be done by a third party)?
  • Percentage of profit split?
  • Who pays for what and when in the project?
  • What happens if someone runs out of money?
  • Who services the loan?
  • How regularly will you communicate and in what manner?
  • Dispute resolution process?

Other questions that need to be covered in the Joint Venture agreement include:

  • What if it doesn’t sell for the asking price – do we drop price and to what and when?
  • What if it doesn’t sell/rent?
  • What if we run out of money?
  • What if someone dies/gets divorced etc.?
  • What if someone gets sued or goes bankrupt?
  • What if we don’t agree on something?
  • What if we don’t get the approval required?
  • What if it takes longer than expected?
  • What if we make a loss?

Please make sure to include as much detail as possible in the Joint Venture contract, this ensures that if any issues do arise during the process you will know exactly what to do as its already been documented from the outset.

Pacific Law has a fantastic Joint Venture checklist on their website. They have offices all over Australia and deal with these contracts on a day-to-day basis. I highly recommended that you complete the checklist and add any additional details in preparation for having a joint venture agreement drawn up.