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Agreement Creating Joint Venture
1. Introduction. Agreement made [date] between
[name] of [address] (A) and [name] of [address] (B).
2. Property. A has signed a contract of sale for the
purchase of certain property located in [town, county, state],
more particularly described as follows: [description]
3. Mortgage Financing. B is able and has agreed to
obtain mortgage financing for the acquisition of the Property, in
an amount not less than ........ dollars ($........), at an
interest rate not greater than ........ percent (........%), with
a total loan fee or service cost not greater than ........
dollars ($........), and for a term not less than [number]
4. Formation. A and B form a joint venture (Joint
Venture) for the term and purposes and in accordance with the
provisions in this Agreement.
5. Purpose. A and B wish to create Joint Venture
solely to acquire the Property, own, and dispose of it, pursuant
to this Agreement.
6. Powers. Joint Venture has all powers reasonably
necessary or incidental to the carrying out of its purpose.
7. Name. The name of Joint Venture is [name] ,and
its business will be conducted under that name (or such other
name as A and B shall agree upon).
8. Office. The principal office of Joint Venture will
be located at [address].
9. State Requirements to Conduct Business. A and
B, and Joint Venture, will execute and file all certificates,
and take all other action, that may be required to conduct
business in [county, state].
10. Term. The term of this Agreement will commence as
of the date of this Agreement, and will end on the date the
Property has been disposed of, unless terminated earlier by:
a. Agreement of A or B;
b. Adjudication of either A or B as a bankrupt,
its filing of a voluntary petition in bankruptcy, the
filing of any petition against it under any federal
or state bankruptcy or insolvency law, or its filing
of a petition or answer seeking the appointment of a
receiver of its assets or an arrangement with
creditors under any such laws;
c. Breach by either A or B of any material covenant
under this Agreement (subject to the provisions of
Paragraph 11); or
d. Death of A.
11. Notice and Cure of a Material Breach. If there is
a material breach of this Agreement, the party intending to
terminate must give the defaulting party [number] days' written
notice, detailing the particular action or condition that is
claimed to constitute a material breach. The defaulting party
may cure the breach during this period or take steps to cure and,
if cured, or if the steps taken to cure the breach will do so
within a reasonable period if diligently prosecuted, then this
Agreement will not terminate.
12. Representations. A represents that:
a. Complete and Valid Contract. The contract of sale
for the Property, annexed to this Agreement as Exhibit A
(Contract of Sale) [omitted], is true and complete, in full
force and effect, and no breach or default exists under such
b. Assignment of Contract. A may assign the
Contract of Sale, without the consent of the seller under such
contract or any other person; and [other representations, for
either A or B as necessary, i.e., as to condition of the
c. Acquisition. A and B will acquire the
Property in accordance with the Contract of Sale. Title to the
Property, and all other assets acquired by or for Joint Venture,
will be held by A and B as tenants in common (with A
holding an undivided ........ percent (........%) interest, and
B holding an undivided ........ percent (........%) interest).
13. Acquisition of and Title to the Property.
a. Assignment of Contract of Sale. Simultaneously
with the execution of this Agreement, A will assign to A and
B the Contract of Sale, in the form annexed to this Agreement
as Exhibit B [omitted].
b. Loan Commitment. Promptly after execution of this
Agreement, and in no event later than the closing date stated in
the Contract of Sale, B will obtain a written commitment to
make the Loan, issued by a bank or savings and loan association
in favor of A and B and to be secured by the Property.
14. Capital Contributions. On the date of this
Agreement, A and B will each contribute ........ dollars
($........) to the capital of Joint Venture. On the closing
date, as defined in the Contract of Sale, A will contribute
........ dollars ($........) to the capital of Joint Venture.
Neither A nor B will have any obligation to contribute any
other capital to Joint Venture.
15. Interests, Profits, and Losses. A is given a
........ percent (........%) interest in Joint Venture and in the
profits, and is chargeable with such percentage of the losses of
Joint Venture. B is given a ........ percent (........%)
interest in Joint Venture and in the profits, and is chargeable
with such percentage of the losses of Joint Venture.
a. Manager. A will act as the manager (Manager) of
b. Manager's Authority. Subject to the provisions of
Section 16 (c), Manager will have full power and authority to
conduct and manage the business of Joint Venture and to undertake
and implement, on behalf of Joint Venture, all Joint Decisions
approved by A and B.
c. Joint Decisions. None of the following matters
(Joint Decisions) may be undertaken by or on behalf of Joint
Venture, and no expenditures or obligations may be incurred in
connection therewith, without the prior consent or approval of
both A and B:
i. Encumbrance of property. The mortgaging or
other encumbrance of any portion of the
Property or any other property of Joint
Venture (other than the Loan), or the
borrowing of funds by or on behalf of Joint
Venture in excess of ........ dollars
($........) in the aggregate in any
ii. The loan. The modification, extension, or
payment of the Loan.
iii. Employment of related persons. The
employment of, or the payment of any
compensation to, any person, corporation,
or other entity with or in which either A
or B has an interest.
iv. Large expenditures. The expenditure of any
sum in excess of ........ dollars ($........)
for any one service or item.
v. Employment of accountants and attorneys.
The employment of independent certified public
accountants or attorneys for Joint Venture,
and the discharge of the same.
vi. Sale of the property. The sale of the
Property, or any portion thereof. [any other
decision in which the consent of both parties
vii. Other. Any other action that, under any
other provision of this Agreement, requires
the consent or approval of both A and B.
d. Manager's General Duties. Manager, on behalf of
Joint Venture, shall diligently and in good faith operate the
Property, and implement or cause to be implemented the Joint
Decisions approved by A and B, and otherwise conduct the
business of Joint Venture in accordance with this Agreement.
Manager will devote such time and attention to the business of
Joint Venture as is reasonably necessary to accomplish the
purposes of Joint Venture.
e. Collections and Payments. Manager will collect
all rents and other sums payable to A and B as owners of the
Property and will, out of and to the extent that the funds of
Joint Venture are sufficient:
i. Pay all taxes and assessments imposed
against the Property and all other debts and
obligations of Joint Venture.
ii. Maintain adequate hazard and public
liability insurance with respect to the
Property and Joint Venture.
iii. Comply with all laws and other governmental
requirements applicable to Joint Venture and
f. Books of Account. Manager will maintain complete
and accurate current books of account for Joint Venture. Such
books of account must be kept in accordance with generally
accepted accounting principles and practices. Both A and B
and their authorized representatives shall at all reasonable
times have access to, and may inspect and make copies of, such
books of account and all other books and records of Joint Venture
and Manager. At the request of either A or B, an audit of
the accounts of Joint Venture will be annually made by
independent certified public accountants selected by both A and
B, and their report is to be furnished to both A and B.
g. Quarterly Statements. Within [number] days
after the close of each calendar quarter, Manager will cause to
be prepared, and furnish to both A and B, a detailed
unaudited financial statement, which Manager states as true and
correct to the best of Manager's knowledge, showing the results
of the operations of Joint Venture for such period and its
financial condition as of the close of such period,
h. Annual Statements. Within [number] days after
the end of each fiscal year, Manager will cause to be prepared by
Joint Venture's independent certified public accountants and
furnish to both A and B:
i. A balance sheet of Joint Venture as of the
end of the fiscal year and a related statement
of income or loss for Joint Venture for such
fiscal year that, if requested by either A
or B, shall be certified by such accountants
ii. A statement setting forth in reasonable
detail each Venturer's share of the income or
loss of Joint Venture for such fiscal year
iii. Such other information as may be reasonably
necessary in order to enable both A and B
to prepare their tax returns
17. Compensation of A and B. Without the prior
approval of both A and B, neither A nor B will be
entitled to compensation for services that A or B provided on
behalf of Joint Venture.
18. Distributions of Income. After the end of each
calendar quarter, any funds that A and B determine are not
required for the payment of Joint Venture's obligations or for
the purposes of Joint Venture will be distributed ........
percent (........%) to A and ........ percent (........%) to
19. Bank Accounts. All sums received from the Property
and all other funds of Joint Venture will be deposited in the
joint names of A and B in such bank accounts as both A and
B designate from time to time, and withdrawals from such
accounts may be made upon the signature of such person or persons
as both A and B will designate from time to time.
20. Disposition of Property. If the Property is sold
to a bona fide purchaser, the proceeds will be used to pay all
sums outstanding under the Loan (unless the Loan may be and is
assumed by the purchaser), and, thereafter, the net proceeds
(less all expenses of the sale, including closing costs, attorney
fees, and broker's commissions) will (i) be used toward the
payment of any debts and liabilities of Joint Venture and,
thereafter, (ii) be distributed to A and B according to their
respective interests, as enumerated in Paragraph 15.
21. Transfers of Interest in Joint Venture.
a. Restriction on Transfer. Neither A nor B may,
without the prior written consent of the other party, sell,
assign, or transfer in any way, or mortgage, hypothecate or
otherwise encumber, A or B's own interest in Joint Venture.
Any attempted action in violation of this provision will be null
and void. However, no transfer to the heirs or beneficiaries of
A upon A's death shall be deemed a transfer in violation of
b. Conditions of Transfer. No sale, assignment, or
transfer permitted under Section 21(a) is valid or effective
unless (i) the purchaser, assignee, or transferee assumes, in
writing, the obligations of the seller, assignor, or transferor
under this Agreement and (ii) the instruments effecting such
sale, assignment, or transfer, and such assumption, are in form
and substance reasonably satisfactory to the attorneys for the
other party to this Agreement, and an executed counterpart of
each such instrument is furnished to such other party.
a. At Termination. On termination of this Agreement,
all assets of Joint Venture must be liquidated, as quickly as
practicable but in a manner that minimizes the usual losses
occurring in a liquidation. A or B may bid for and purchase
any of the assets of Joint Venture.
b. Proceeds. The proceeds of the liquidation are to
be applied in the following order of priority:
i. Payment of the expenses of liquidation
ii. Payment of the Loan
iii. Payment of all other debts and obligations
of Joint Venture, and the creation of a
reserve for any contingent liabilities of
iv. Payment to A and B, pro rata, of their
v. Payment of balance as follows:
........ percent (........%) to A and
........ percent (........%) to B
23. Not a Partnership. This Agreement shall not be
deemed to create a partnership between A and B.
24. Governing Law. This Agreement shall be governed by
the law of [state].
25. Entire Agreement. This Agreement embodies the
entire Agreement between A and B with respect to Joint
Venture. All prior agreements, presentations, and statements are
merged into this Agreement.
26. Survival. All the representations and covenants
contained in this Agreement will survive the acquisition of the
Property and the termination of Joint Venture and this Agreement.
[name of A]
[name of B]