Any business or individual taking part in a joint venture knows that such projects do not come without its share of risks. Though joint ventures can start out with the best of intentions and even with a joint venture agreement in place, not all issues can be avoided.
Joint venture disputes can be complicated because more than one entity is involved and the amount of resources invested can pose a problem. Not only that, but joint ventures do not have the same official legal status as say a partnership does.
These are a few of the major reasons why it is important that as a company looking to work on a project with another company, detailed research on the prospective companies or individuals be done, and a full assessment of your own company be made to determine if your business is ready to take part in a joint venture.
Joint Venture Disputes
Joint venture disputes can occur for any number of reasons. Knowing how a few of them occur and why disputes arise can help you anticipate and avoid them. For example, joint venture disputes can arise because of a few of the following issues:
- Unclear or different objectives about the joint venture project
- An imbalanced share of resources: expertise, monetary investment or assets
- A difference in work, collaboration, and management styles
- Insufficient leadership, communication or support
- Lack of cooperation or follow through on project tasks
What are the implications of a joint venture dispute?
When a joint venture dispute occurs, it can cause major problems. It can cause project disruption, a halt to the overall workflow, and a negative change to the working atmosphere.
In such cases, partners will have to set special orders in place to maintain a status quo, implement orders to keep information confidential, or an injunction may be filed to keep partners from selling or dissolving resources.
As mentioned, joint ventures are not commonly recognized as a legal entity. There are small, but significant differences between a joint venture and a partnership. Consider that if a dispute is taken to court, the joint venture, and in turn, the dispute itself, may be seen and treated from the perspective of a partnership by the judge. This means that all parties could be held liable for any legal or financial penalties, outcomes or implications as if the project were operating as a partnership. Note that a joint venture agreement in itself may not be sufficient proof.
What to do when you have joint venture disputes?
Given the above, it is important to know what to do when a joint venture dispute occurs. First and foremost, you should refer to the joint venture agreement. The security of having a joint venture agreement cannot be underestimated. It should anticipate for the worst case scenario and include clauses on how to handle disputes.
Some dispute resolution clauses can include items that act as controls on certain issues. For instance, parties can agree to go through a mediation process if the point of dispute will result above a certain financial amount. The joint venture agreement can also set out obligations that must be upheld according to when outcomes and goals are met. In addition, parties can include a plan of what should happen if a project is not completed on time and consider extending deadlines or even impose penalties.
One other possible solution is to seek mediation. Consulting and hiring a mediator can be more cost and goal effective than litigation. Mediators can help open up communication blocks and provide creative solutions that are beneficial to all parties involved.
One action is to contact a corporate lawyer to come to a resolution. Hiring a corporate lawyer to represent your company’s interests is essential to protecting your business. Should you need to resolve a joint venture dispute, you can consult with OMQ Law for free.
Our Toronto corporate lawyers are skilled at drafting and interpreting agreements and representing clients on a corporate level. Their experience and mediation skills can help to generate the best results for all parties involved.