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Joint Ventures

Year: 
2012
Description: 

Joint ventures by business entities have become increasingly common and increasingly important to the economic life of Canada and other countries. They are prevalent in the construction industry for large projects such as dams, road works and public buildings. They are often used in the energy industry to provide efficiencies in the development of oil and gas properties. They are also used for smaller undertakings such as the development of a small subdivision. However, while the joint venture has developed, the legal landscape in which it operates has not developed to accommodate it. In particular, a joint venture is at risk of being categorized for legal purposes as a partnership and thus subject to a Partnership Act first adopted in 1896 and to common law that has developed over the centuries. There is thus a lack of fit between the applicable law on the one hand and the exigencies of present-day joint ventures on the other hand. This lack of fit results in a degree of uncertainty which has not necessarily been removed even if joint ventures have attempted to assert their status clearly.

Status: 

Completed 

Jurisdiction: 

Alberta

Timeline: 
May 2012 Final Report
May 2011 Consultation Memorandum

 

Purpose: 

The purpose of this report is to recommend legislative reform to clarify the lack of certainty by allowing a joint venture to take itself out of the law relating to partnership. To do so it would have to meet two requirements – declare in writing that it is not a partnership and carry on business under a name that includes 'Joint Venture' or 'JV'. A joint venture that meets these conditions would effectively take itself out of the law applicable to partnerships. This aspect of our recommendations would clarify the law relating to the relationships among joint venturers. The second aspect of our recommendations would clarify the law relating to the relationship between a joint venture and third parties. We do this by simplifying and redefining the basis of liability between the joint venturers and third parties. Finally, we set out the timing and effects of how a new or existing joint venture might meet these requirements. 

Results: 

We have not attempted to make a statutory regime for joint ventures, leaving them to govern their relationships by contract. This is on the basis that joint ventures need the flexibility that a contractual agreement provides to them. Where the parties to such an agreement wish to make it clear that they are not a partnership, we have recommended a method by which such a declaration would be effective. In our view, this would bring about the necessary clarity without imposing unnecessary legislative regulation.

Revision History:
This summary was last reviewed in Aug 16, 2012:custom:F, Aug 16, 2012:custom:Y.