Contractual joint venture agreement

This is a contractual joint venture. Two businesses agree to run a project together under a contract, and no new company is formed. Nobody issues shares, nobody appoints a board, and nothing appears at Companies House. For a defined project with a defined end, that is usually the right structure, and it is faster and cheaper than incorporating.

The trade-off is that there is no separate legal entity to hold the assets, carry the liabilities or absorb a dispute. Everything depends on what the contract says, which is why the schedules matter more here than in most agreements.

The partnership problem

A collaboration that shares profits can amount to a partnership in law even where the document says in terms that it is not one, and partners are jointly liable for each other's acts. Clause 3 is drafted to reduce that risk, but how the parties behave carries more weight than the label they use. If the two of you hold yourselves out as one business, share a bank account loosely and let each side commit the other, a court may find a partnership whatever the heading says.

What the agreement covers

The purpose and scope of the project, and contributions from each party, valued and timed in Schedule 2. Conduct of the project and a steering committee, with reserved matters in Schedule 4 that cannot be decided without both parties, and a deadlock procedure for when the committee cannot agree. Budget and joint venture costs, revenues, accounting and the profit share in Schedule 3. Intellectual property, with two options at clause 10 for anything created during the project, one holding it jointly and one not. Then confidentiality, restrictions during the term, data protection, warranties, liability, insurance, termination, the winding up of the project, exit and transfer restrictions, and dispute resolution.

Two things to settle before signing

Competition law. If the parties compete, or would compete but for the collaboration, the restrictions at clauses 12 and 13 and anything agreed about prices, customers or territories may engage Chapter I of the Competition Act 1998. That needs advice before the terms are fixed rather than drafting around afterwards.

Money. Open a separate bank account for the project in the lead party's name, used only for joint venture revenues and costs. The accounting clause then works as intended, and the wind-up at the end becomes an arithmetic exercise rather than an argument.

When to use something else

If you want a joint venture company with its own board, its own shares and limited liability, this is the wrong document. That route needs a shareholders' agreement and bespoke articles. Joint ventures fail most often on money, control and exit, so complete all four schedules properly before anyone signs.