Joint venture agreement in construction industry

Abstract

The term Joint Venture (IV) is one which is heard with increasing frequency and popularity in construction industry. Nowadays, it is widely practiced for largescaled multi-disciplinary infrastructure projects as a means to share risks and resources by partners. To ran a joint venture effectively and without conflict has proven impossible. It is of great importance that the parties’ objectives and contributions to the venture are properly and clearly described in the joint venture documents. In view of the fact that the implementation of the Standard or Model Form of Joint Venture Agreement (JVA) is new to the Malaysian construction industry, the purpose of this research is to investigate the needs of forming a legally binding joint venture agreement, to examine the problems encountered and to attempt to develop a model form which will, at the very least, provide introductory reports as to what joint venture agreements are all about and how these can satisfactorily safeguard the interests of the joint venture parties. The methodology of this research adopts from literature review on JVA as well as analysis of the cases law findings on what needs to be incorporated in the model JVA. As a conclusion with this research, the lack of specific legislature, regulations and governing/regulatory body/authority overseeing the formation of JVs has left organizations to resort to their own devices in formulating JVs. This has given rise to, among others, bespoke agreements which have resulted in abuse and unfairness to numerous parties to JVs. Malaysia should seriously consider setting up a formal structure of governance over this form of business relationship. There should also be a standard JV Model Agreement to be used as reference and serve as guidelines during negotiations by the prospective parties to JVs.