The joint venture and partnership is two different concepts. The joint venture refers to the contractual agreement, which joins two or more than two people for the object of executing the specific business enterprise. In a joint venture, each party of agreement agree to share the profit and loss of business enterprises. On the other hand, the partnership is called link of two or more than two people to conduct single business undertaking for attaining profit. Generally, there is no significant distinction between partnership and joint venture. A joint venture is regarded as the form of partnership.
In this report, the difference between partnership and joint venture, legal issue related to definition of joint venture is discussed and examined with the help of case law.
Definitions of Joint venture and partnership:
Joint venture is not partnership in severe sense though it is temporary partnership. The joint venture is not formed through operation of law. The joint venture establishes the fiduciary relation or confidential relation between the parties. However, the presence of joint venture is subject of matter, which has to be determined in accordance with the particulars and conditions of every case. The joint venture is defined in many ways-
• As per the definition of joint venture, the joint venture is business or project, where two or more than two corporations or people have made investment with the purpose of functioning together (Bryson, 2016).
• The joint venture is prearrangement between two or more than two corporations or individuals to perform together for the specific object or on specific assignment (Elgin, et. al, 2017).
• A joint venture is called commercial undertaking accepted jointly by two or more than two people which otherwise keep their different recognition.
Further, the partnership refers to the procedure or method of business in which ownership is shared by two or more than two people. The partnership has been defined as follows-
• The partnership is called relationship where two or more than two individuals, corporations, or nations perform together in the capacity of partners.
• The partnership is a corporation, which is owned by two or more than two individuals, who share threats and rewards of undertakings (Nyström, et. al, 2018)
The leading cases dealing with the definition of a joint venture:
In the case of Canny Gabriel Castle Jackson Advertising Pty Ltd v Volume Sales (Finance) Pty Ltd (1974) 131 CLR 321, the Fourth Media Management Pty Ltd was the promoter. It was made an agreement with singers Elton John and Cilla Black in respect of making performance in Australia. Volume Sales (Finance) Pty Ltd gave consent to promoter that it will make available money as loan to sufficiently finance event. In return, Volume Sales (Finance) Pty Ltd was to be provided one-half interest in contract and to execute contract as joint venture. It was stated by agreement that Volume Sales (Finance) Pty Ltd had refunded amount of loan and expenditures. The benefits will be allocated between promoter and Volume Sales (Finance) Pty Ltd equally.
In this case, it was the question whether the contract between Volume Sales (Finance) Pty Ltd and promoter was partnership or joint venture. On the basis of fact, it was held that the parties of contract had made partnership but defined that agreement as joint venture. In particular, Volume Sales (Finance) Pty Ltd and promoter had entered together to carry out commercial undertaking with object of making benefit. The profits were required to be allocated and the expenditures should be shared. The policies related to business were also required to be agreed (Wong, et. al, 2018).
Furthermore, the other question was what was legal nature of interest of Volume Sales (Finance) Pty Ltd in box office proceeds. On this question, it was held by the court that share of partners is not considered as specific property but an authority to his share of surplus after asset-realisation, debt payment and payment of obligations. It states that they relate to partnership that is to membership of partnership (Cordonnier, et. al, 2016).
The legal issues dealing with the definition of a joint venture:
The joint venture may create in various forms. It can be defined in several terms. There are many legal issues to be considered at the time of planning of joint venture. The individuals are required to document the process of sharing the profits and losses taken by venture. It is also required to clearly define the contribution of cash, services and property. The agreement of joint venture should clearly define the amount and procedure of termination of joint venture. The joint venture includes mutual undertaking among people with connection of strategic operations of business, abilities and targets. It is required by corporations and individual that they should clearly understand the legal boundaries of complete relationship (Ni, Hu & Hu, 2014).
The joint venture agreement must define the responsibilities of parties in respect of confidential details, which are established during then arrangement of joint venture. Further, the main important factor is consenting upon the opportunities of corporations. As per this, the related issue is how a joint venture will determine whether to follow an opportunity of business which is recognised by any party of contract. Furthermore, other important issue is that whether any party of joint venture can elect to wind or terminate joint venture or whether it is required by both parties of joint venture to give consent on the termination (Hearn, 2015).
Selection of business structure-
Most common forms of business undertakings in Australia are partnership and joint venture. Each form has its own advantages and disadvantages. A dedicate balance of competing considerations are required to choose correct business. The main issue in deciding between partnership and joint venture is liability. In partnership, partners are jointly accountable for obligations of partnership. On the other hand, in joint venture members are liable only to extent of their investment in stock of company. Thus, if joint venture is established by agreement, then parties are privately discovered to responsibilities in venture, same as partnership. The fiduciary duty of member of joint venture is not infinite, though partnership fiduciary duties are more interpreted. These distinctions help to decide structure of business (Castro & Chatani, 2015).
As per the above analysis, it can be concluded that partnership and joint venture are basic structures of business. At the time of developing the financial and managerial framework, one should consider the advantages and disadvantages of each business structure to meet specific purpose.