Partnership and contractual joint venture

A contractual joint venture is an agreement under which one or more persons grant one or more other persons a share in the profits and losses of one or more operations. It acquires no legal personality, and each participant contracts with third parties in their own name.

This structure may suit a defined project, event, commercial development or collaboration where the parties do not yet wish to establish a joint company.

The agreement must turn contributions and percentages into a verifiable operational mechanism.

• The project’s scope, duration, territory and outputs.
• Contributions of money, property, services, reputation, contacts or intellectual property.
• The participant managing operations and the limits of their decision-making powers.
• Third-party agreements, invoicing, accounts and expense approvals.
• Calculation and distribution of profits and allocation of losses.
• Reporting, document access and audit rights.
• Rights in the brand, content, software or customer base.
• Deadlock, withdrawal, exclusion, termination and winding up joint operations.

A 50/50 split without a deadlock procedure can halt the project. A vaguely described contribution may make non-performance impossible to assess. If one participant signs third-party contracts, the others do not automatically become parties merely because they internally share the results.

The accounting and tax regime must be checked before payments start. A legal agreement cannot compensate for records assembled after the project launches.

Before drafting, a term sheet capturing the project’s economics and decisions already agreed is useful.

• The budget, contributions and project timetable.
• The financial model for revenue, costs and distributions.
• The list of third-party agreements to be signed.
• Assets and intellectual property rights used.
• The matrix of ordinary and reserved decisions.
• Exit, failure, budget-overrun and deadlock scenarios.