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A Joint Venture Agreement is a contract between two or more individuals or businesses who would like to undertake a new discrete project, start a new service, or do some other type of specific work together in order to make a profit.
Importantly, there are several different structures that Joint Ventures may take. One of the most common structures is for parties to simply enter a contract together, agreeing to do certain things together. However, in some other cases, parties choose to create a company or some other legal entity together for the sole purpose of undertaking the Joint Venture.
This Joint Venture Agreement does not create a company or any other legal structure. It is simply a contract between the various parties. It says what the parties will do together, and what their various rights and obligations will be.
A Joint Venture Agreement is more limited than a Partnership Agreement. In a Joint Venture, the parties are only working together for one specific activity (for example, to develop and sell one piece of real estate). By contrast, in a Partnership, the parties may work together on an ongoing basis (for example, by continually buying, developing, and selling different pieces of real estate).
In a Joint Venture Agreement, the parties come together to define the scope of the joint venture and their respective obligations so that everyone is on the same page before the new project, service, or other venture can begin.
The Joint Venture Agreement describes the purpose of the joint venture and sets up everything the parties need in order to start their business together. Ownership allocations, including profit and loss, are one of the critical points of a Joint Venture Agreement, as is the termination clause.
The document is a valuable foundation document for starting a Joint Venture with another individual or business and will help the parties outline clear communication for their venture together.
Some Joint Venture Agreements may breach Australian competition law
Under the Competition and Consumer Act 2010 (Cth) ("CCA") if several businesses that operate in the same market come to some kind of agreement about how they will do business, there is a risk that this agreement could constitute conduct which is considered "anti competitive" or "cartel conduct".
The CCA deals with various anti competitive practices and cartel conduct in Australia. This includes such things as price fixing, output restrictions, market sharing, bid rigging, exclusive dealing and various other actions and agreements in which competing businesses may engage, in order to reduce competition in their market. The CCA prohibits much of this conduct, and imposes significant penalties on businesses that engage in it.
"Price fixing", for example, may occur if the parties are making some kind of secret agreement to fix their prices (ie to keep them artificially high) rather than competing openly against each other.
"Output restrictions" may occur when competitors agree to prevent, restrict or limit the volume or type of particular goods or services available to consumers. This may be intended to reduce the available supply of particular goods or services, in order to increase the price of those goods or services on the market.
"Market sharing" may occur when competitors agree to divide or allocate customers, suppliers, or territories among themselves rather than allowing competitive market forces to work. Market sharing restricts competition, forces prices up, and reduces choice in relation to price and quality for consumers and other businesses.
"Bid rigging", which may also be referred to as "collusive tendering" may occur when two or more competitors agree they will not compete genuinely with each other for tenders. Instead, they choose to allow one of the parties to "win" the tender. They may take turns to be the "winner" by agreeing the manner in which they submit tenders, including by some competitors agreeing not to tender. Bid rigging leads to uncompetitive tender processes that can result in organisations paying higher prices for goods or services, or receiving lower quality goods or services.
"Exclusive dealing" refers generally to some kind of exclusive dealing between the parties, for the purpose, or with the effect or likely effect, of substantially lessening competition (whether competition between the parties, or competition more generally).
When we refer to "lessening competition", we are talking generally about practices in which businesses might engage, such as the making or giving effect to a contract, arrangement, or understanding, or some kind of concerted practice, for the purpose, or with the effect or likely effect, of substantially lessening competition. This might relate to the lessening of competition between the parties, or competition more generally. Competition in a market helps to increase the supply of goods or services in the market, and therefore reduces the price. If the parties do something which has the effect of "substantially lessening competition", this may increase the price.
If the parties have any concerns at all about whether or not they are going to be affected by these laws, they should strongly consider obtaining legal advice.
This Agreement is only designed for use among parties which are not engaging in anti competitive or cartel conduct.
Further information is available on the website of the Australian Competition and Consumer Commission.
How to use this document
This document may be used when two or more parties, whether those parties are individuals or businesses, are looking to enter into a Joint Venture together. The Joint Venture can be for any legitimate, lawful purpose.
This Joint Venture Agreement will allow the parties to enter the following information:
This Joint Venture Agreement will cover all the ground needed for two or more parties or entities to begin a successful new project.
When this document is completely filled out, it may be signed by all parties and each party can keep a copy for their records. If possible, the original may be kept with the assets of the Joint Venture itself.
Common law principles of contract law may apply.
In addition, many forms of Joint Venture are also affected by specific legislation in Australia. For example, property developers, companies, and businesses may all be affected by industry specific legislation at the state or commonwealth level.
In addition, in some cases the Australian Consumer Law which is set out in the Competition and Consumer Act 2010 (Commonwealth), may also apply.
The parties may risk breaching the cartel provisions of the Competition and Consumer Act 2010 (Commonwealth) if they propose to engage in any kind of anti-competitive or cartel conduct.
If in doubt, seek legal advice.
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