There are many important provisions to include in joint-venture agreements between contractors pursuing a project. (For a list of five important provisions to include in joint-venture agreements, click here.) One important thing to address in a joint-venture agreement is how capital contributions will be handled.

Here are questions to consider when drafting a capital call provision in a construction joint-venture agreement:

  1. Who will determine that additional capital is required for the joint venture to complete the work?
  2. Who has to agree with that determination? In joint ventures with more than two contractors, will it be a simple majority vote or will unanimous consent be required?
  3. If unanimous consent is required, will one of the joint venture partners—likely the majority partner—have the right to make a unilateral capital call when/if the majority partner decides that without the capital, the joint venture cannot successfully complete the project?
  4. How will disagreements regarding capital calls be handled? If unanimous consent is required for capital calls, how can the partner who believes that additional capital is needed to complete a project challenge the other partner’s refusal to contribute capital to the joint venture? If a partner may make a unilateral capital call, how may the other partner challenge that capital call as unreasonable?

The above questions are worth considering and expressly addressing in a construction joint-venture agreement. If language addressing the above questions is not included, there may be disputes between partners in a construction joint venture as to capital calls.

There have been at least a couple of significant, recent disputes regarding this issue. One of those disputes is currently being litigated in a federal court lawsuit between two contractors—Archer Western and The McDonnel Group.Continue Reading How to Address Capital Calls in Construction Joint-Venture Agreements

Surprisingly, one of the my most popular posts was about creating joint ventures to bid on public projects. Since I wrote that post, it has become more and more common for construction companies to team up to bid on public projects.

When forming a joint venture, it very important to have a written joint-venture agreement between the contractors teaming up to bid on a project. Here are five provisions that should be included in every construction joint-venture agreement.Continue Reading Five Provisions to Include in a Construction Joint-Venture Agreement

Many construction projects are getting larger and more complex. This is especially true for public-works projects. Joint ventures allow one or more contractors to make a combined effort to obtain and complete projects.

There can be many benefits to forming a joint venture to bid on a project. A joint venture can allow one or more contractors to spread the financial risk of a project. Joint ventures can also allow two contractors with different specialties to join forces to bid on a project that requires the experience of both contractors. Finally, a joint venture can increase the bonding capacity of contractors to allow them to bid on larger projects that may otherwise be out of reach.Continue Reading Creating Joint Ventures to Bid on Public Projects