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A joint venture is an association of persons or corporations who agree to engage in a single common enterprise for mutual profit. McRoberts v. Phelps, 391 Pa. 591, 138 A. 2d 439, 443 (1958). A joint venture is formed by contract which can be expressly written or implied by the acts and conduct of the parties. Id. Much like a partnership, the parties' contributions need not be equal in character or amount. See, Smellbaker v. Herman, 315 Pa. Super 520, 527 462 A. 2d 713, 716 (1983). Also, the co-adventurers can stipulate by contract the liability of each party. Id. However, unlike a partnership, joint ventures are usually formed for the performance of a single transaction and not for a continuing business enterprise. Id.
A joint venture will be implied by the conduct of the parties if the following four conditions are found to exist:
- Each of the parties makes a contribution, not necessarily of capital, but of some services, skill, knowledge, materials or money;
- Profits are to be shared among the parties;
- There is a proprietary interest and right of mutual control over the subject matter of the enterprise; and
- Usually, the parties' activities involve a single business transaction rather than a general and continuous business relationship.
Keeler v. International Harvester Used Truck Cent., 317 Pa. Super 244, 246-247, 463 A.2d 1176, 1178 (1983).
When parties enter into a joint venture, either express or implied, they form a confidential relationship between each other and have a fiduciary duty to one another. Iron Worker's Sav. And Loan Ass'n v. IWS, Inc., 424 Pa. Super 255, 271, 622 A.2d 367, 375 (1993) (citing Smellbaker, supra, at 529, 718). This fiduciary duty requires a party to a joint venture to carryout its obligations with loyalty, fairness, good faith and full disclosure towards its co-adventures. McRoberts, supra, at 603, 445. Therefore, officers or directors of a corporation in a joint venture have a duty to fully disclose and reveal to their co-adventures any of the corporations activities which may negatively affect their co-adventures. Id.
Jones, Gregg, Creehan & Gerace, LLP provides comprehensive business services for its clients. For more information concerning Joint Ventures contact Richard B. Sandow at rbs@jgcg.com.
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