Two basic types of joint-venture arrangements are common in the construction industry: conventional joint ventures and item joint ventures. Without joint and several liability, owners would not award construction contracts to joint ventures. Joint and several liability means to each partner company that, if the other partners are unable or unwilling to meet their share of joint-venture obligations, each partner company can be held liable, not only for that partner’s share but also for the other partners’ shares as well-for the joint venture’s total obligation. The fundamental principle behind joint-venture agreements is that the partners agree to be jointly and severally liable with respect to the duties, obligations, and liabilities of the joint venture. Usually, the joint-venture agreement will predate the prime contract. Although it refers to the owner and the prime construction contract to which the joint-venture entity and the owner are the parties, it is not a flow-down agreement. This agreement is a contractor’s contract. The subject of this chapter-the joint-venture agreement-is the construction industry document that addresses these concerns.
For instance, who is responsible to the owner for contract performance? Who is liable in the event of a default? The partners, in turn, need to decide how liability as well as profits are to be shared between them, where they get their working capital, who will direct the day-by-day activities on the job, who will own the joint venture’s assets, and what will happen if an individual partner cannot or will not meet its obligations to the other partners.
#Joint venture agreement series
When a joint-venture entity submits a successful bid, a series of issues are created that affect both the owner of the project and the joint-venture partner companies. The concept is not unlike that of a partnership between individuals, except that entire companies are involved as partners. To submit a joint-venture bid, two or more contractors form a new and separate legal entity to submit the bid and, if the joint-venture bid is successful, this entity then executes the ensuing construction contract. Since each partner in a construction joint venture usually prepares an independent cost estimate for the performance of the project, risk is reduced by basing the joint-venture bid on more than a single cost estimate-that is, two (or more) heads are better than one. Joint venturing may make it possible for a single contractor to participate in a bid on a project that would otherwise be too large a risk. Several factors make this practice attractive. Two or more construction contractors sometimes compete for a particular project as a joint venture by pooling their resources and sharing the risk and potential profit.
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