Georgia Joint Venture Contract Drafting Essentials (PART III)

Joint Venture Construction Contracts Disputes and Resolution

by Mark A. Cobb

In two previous blog installments (click here for Part I, click here for Part II, click here for Part IV, click here  for Park V on remedies and defaults) we began a discussion on key issues in joint venture agreements.  Although, our comments are not limited to construction contracting in Georgia, our construction attorneys are experienced in drafting and negotiating joint venue contracts and, now, we continue our series with a discussion on key issues related to the internal management of a joint venture.

There are, frequently, three components to the internal management of a joint venture:
1.    the Executive Committee;
2.    the Joint Venture Management Team; and/or
3.    the Project Manager.

JV Executive Committee: Every joint venture agreement needs an Executive Committee which has the final word on management issues; typically, the Executive Committee is comprised of a set number of representatives appointed by each party to the joint venture agreement.

JV Executive Committee Voting:  Although it may not always be possible, the goal of the Executive Committee should be to make all decisions unanimous.  In the absence of unanimity, committee votes are usually weighted by the percentage interest of each participant.  Thus, if there are two joint venturers each with a fifty percent interest in the joint venture, you need to make certain that a mechanism is built into your document to prevent deadlocks on issues.  Many JV agreements wisely set forth a list of certain actions which require unanimous consent of the committee members.

Executive Committee Duties: Although their duties vary on each specific project, one essential aspect of the Executive Committee is the overseeing of the distribution of profits (or other assets upon termination); although the Executive Committee members are not typically involved in the day-to-day running of the venue, the must stay up-to-date on the project and its progress.

Joint Venture Management Team: The management team consists of specific individuals from each of the venture participants, and they are closer to the trenches than the Executive Committee.  The Executive Committee has oversight of the management team, but the management team has direct charge and supervision of the performance (and the completion) of the project!  They should periodically provide the Executive Committee with financial reporting and cost accounting and pertinent tax matters.

Project Manager: The project manager is usually identified in the joint venture agreement, but he or she is always subject to replacement by the Executive Committee; similarly, the project manager is usually an individual, but there are companies which specialize in project management, and they may be hired for this position.  Needless to say, the Project Manager has the most hands-on duties as it related to the construction performance and issues; thus, his duties are frequently detailed in the joint venture agreement and may include the following:

  • responsibility for carrying out the work
  • budget preparation
  • scheduling
  • contact with the project owner; and
  • some overlap with the management team duties.

Georgia contractors regularly utilize the benefits of joint ventures to meet the demands of specific projects; prior to entering into a joint venture, however, it is vital to consult an experience Georgia construction contracts attorney.  If you have any questions about your next joint venture agreement, please do not hesitate to contact us!

Also, please leave us a comment about management issues you have encountered in your joint ventures with others!

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