What is a Joint Venture?
A joint venture is an undertaking by two or more entities to jointly perform a single contract. A joint venture can be established by creating a new legal entity, separate and apart from its participants or through a contractual relationship that does not create a separate legal entity. AIA Document C101–2018 is intended to create a joint venture through a contractual relationship and does not create a separate legal entity.
Is the Joint Venture Agreement the Project Agreement for Services?
No. AIA Document C101–2018 forms the relationship between the joint venture parties only. The joint venture will enter into a separate agreement for services with the Project owner.
Does the Joint Venture retain project consultants directly?
No. While there is nothing to preclude a joint venture from entering into services agreements with consultants, AIA Document C101–2018 is set up based on the assumption that the individual parties will be the ones that directly contract with consultants. The Project Agreement attached as Exhibit A automatically becomes effective when the Owner accepts the Proposal and the Team Manager enters into an agreement with the Owner. Such a structure aids in the operation of the indemnity provisions set forth in this agreement because liability arising from a consultant’s performance can be traced directly to one of the Parties. If the joint venture is to retain any consultants, the operation of the indemnity language in this agreement would require significant revision.
How are the Joint Venture parties compensated for their services?
The parties will invoice the joint venture for services provided. The joint venture will then invoice the Project Owner in accordance with the Project Agreement. Once the joint venture receives payment from the Owner, the joint venture will distribute funds to the parties in accordance with the payment terms set forth in C101–2018.
How are decisions made on behalf of the Joint Venture?
Joint venture decisions require unanimity among the joint venture policy board and each party has one representative on the policy board. Because the joint and several liability assumed by each party, the parties enter the agreement on equal footing with regard to the decisions impacting the joint venture.
Must the parties’ interest in the Joint Venture be equal?
No. The parties are free to structure the joint venture as they see fit. Depending on the anticipated role the Parties will play on a project, they may carry a larger or smaller share of the joint venture.