PM131900 - Joint venture

The contention is sometimes advanced that an association between persons for a business purpose falls short of partnership in some way. Such an association is often called a ‘joint venture’. On close examination many of these associations prove to be partnerships, despite the name applied to them. A joint venture which is not a partnership is most likely to be found where parties already carrying on businesses of their own agree to co-operate in a single project but they do not agree to share net profits or losses. Where they do agree to share net profits or losses, it is likely that a partnership will result even where the parties are already engaged in their own businesses - see Morden Rigg & Co and R B Eskrigge & Co v Monks [1923] 8TC450 in which two companies purchased and sold cotton and shared profits. The agreement between them disclaimed that their relationship was one of partnership but the court decided that there was one. In John Gardner & Bowring, Hardy & Co Ltd v CIR [1930] 15TC602 coal merchants entered into temporary and informal arrangements during a strike for the purchase and sale of coal. Profits were divided equally and the court decided that the arrangements were partnerships. In George Hall & Son v Platt [1954] 35TC440 a farmer and an agricultural merchant entered into an agreement to grow carrots. Expenses were met out of gross proceeds and the balance of profit was divided equally. The arrangements were held to be a partnership.

But for a partnership to exist there must be a business. And that business must be a business that is separate and distinct from any other business that the joint venturers may conduct on their own account. Such a situation occurs in a genuine share farming agreement where a landowner and farmer combine, sharing their resources, with each party meeting their own expenses and taking a share of the produce. In these circumstances the relationship will fall short of partnership.