Turkey: Features Of Joint Venture Contract

Last Updated: 23 November 2017
Article by Tuna Çolgar

Introduction

In cases where the means of an individual establishment is not sufficient due to the volume or technical features of the commercial operation that is planned, need for cooperation arises in order to carry such a commercial operation. Partnerships that are formed as joint ventures are frequently encountered in infrastructure projects, as well as in the transportation, energy and construction sectors. Particularly, companies are willing to participate in wide-ranging investments by combining forces under the structure of joint ventures and joint projects which makes for stronger investments by using each other's specialties and the strength realized through financing together.

In doctrine, a joint venture is defined as an "Aggregation of more than one natural or legal entity which are independent from one another legally and financially, under a contract, in order to conduct a work or a continuous operation by establishing a commercial cooperation or without the existence of such cooperation, and to gain profit, by undertaking joint and several liability for the risks of that operation."1

As is clear from the definition, above, two kinds of joint ventures are utilized in practice: "Contractual Joint Ventures" and "Capital Contribution Joint Ventures." In the model of Contractual Joint Ventures, a relationship only consists in a contract of law of obligation stipulated between the parties; there is no need for the presence of a commercial company with a legal entity, and the participation share deeds of the partners are sufficient. On the other hand, in the model of Capital Contribution Joint Ventures, parties of the relationship first form a partnership relationship that possesses the characteristic of a joint venture by conducting a joint venture contract. Then they establish a commercial company that has a legal personality, and commence participate in an already existing partnership.

Contractual Joint Venture

In relation to the categorization of joint ventures according to subject, a contractual joint venture serves the purpose of performing a single work or a continuous activity; whereas, a capital contribution joint venture is formed with the purpose of running long-term commercial operations together>2. The formation of a joint venture, regardless of its nature, is based on a contract stipulated by the participants of the relationship3. Below contractual joint ventures will be examined.

A contractual joint venture is also defined as the relationship that is formed by the aggregation of multiple natural or legal entities that are financially and legally independent from one another, in order to take the responsibility of conduct of the work towards the owner, where each partner is liable for the whole of the work.

In a contractual joint venture, the life span of a joint venture is usually limited to the projected work. In this sense, transience cannot be measured as a contractual joint venture, and terminates when the project that is subject to the contract comes to an end; in other words, when the purpose of the contract is fulfilled4.

In parallel with these explanations, also in practice, a contractual joint venture is formed under the contract stipulated by multiple companies that are financially and legally independent from one another, with the purpose of conducting the whole of the work together, without separating the sections related to their own specialty areas, and jointly and severally sharing risk. As a contractual joint venture qualifies as a risk partnership, enterprises are obliged to state financial purposes of the establishment of such partnership5.

The characteristic quality and distinctive aspect of a joint venture that separates it from a consortium is the partners' liability to the owner for the whole of the work, instead of fragments of it. Even if the work as a whole does fall under the obligation area of a partner, and the work is apportioned in the internal relationship, partners are jointly and severally liable to the owner. In a joint venture contract, it can be openly decided that each partner will be jointly and severally liable for fulfillment of the responsibilities of the partnership.

A contractual joint venture qualifies as a contractual unity, and is not obligated to stipulate a condition-dependent contract. As a general rule, a joint venture does not possess a legal personality as it consists of a contract. While each partner is entitled to represent another for a related joint purpose, it is possible to include special provisions regarding representation of the joint venture in the contract6.

Another feature of a joint venture is that generally a special capital contribution is not assigned to the partnership. Reaching the joint purpose is possible by means of participation shares brought by the partners7. One of the advantages of a contractual joint venture is that assets brought by the partners as per their shares are not assigned to the common ownership of each other8. As this type of joint venture qualifies as a single business partnership, assignment or liquidation of collective or joint ownership is not necessary, and this presents the opportunity of saving time and money, both in the events of aggregation or separation.

One of the most vital features of a contractual joint venture is the partners' participation in the profit and loss of the joint venture. As a rule, partners' portions of participation to profit and loss are determined in the joint venture contract. If there is no provision relating to allocation of profit and loss in the contract, the principle of equality shall prevail9.

Partners can regulate the terms of allocation regarding the management of partnership including, but not limited to, the allocation of profit and loss under the joint venture contract. Determination of the terms regarding the management and decision-making of a partnership that is composed of two independent entities is significantly vital for the operation of a joint venture, and in reaching the joint purpose in the most profitable manner. In order to prevent blockages arising in the management of the joint venture, as well as joint liability to the owner arising therefrom, it is advisable to add a deadlock clause to the contract. Deadlock clauses that are formulated in detail have great importance in maintaining operations and reaching the joint purpose without delay in spite of the blockages arising in the process of management of the partnership.

The choice of law that the partnership relation is subject to should be made carefully according to the qualification of the joint purpose, in order to determine the obligations of the partners of a contractual joint venture to each other, and to resolve disputes arising from these obligations.

Parties come together to realize specific objectives, and all of the deeds that are undertaken by contract are oriented to reach the joint purpose and to profit. In this respect, it is evident that a contractual joint venture constitutes an ordinary partnership with no legal personality.

Conclusion

As a result of a wide range of investments, especially in the areas of infrastructure, construction, energy and mining, corporations are willing to participate in projects to combine their forces and to use each of their specialties and means of financing together, thereby creating a stronger union. This tendency among corporations results in the propagation of the notion of 'joint venture.'

Contractual joint ventures are unions in which at least two entities come together, adopting the purpose of conducting single or temporary work, generally under joint management, to make a profit pursuant to a contract, without assigning any assets to the joint assets of the partners, and are most likely to remain the most preferred partnership instrument in commercial operations that demand sizable investments10.

Footnotes

1 Prof Dr. Nami Barlas, Contractual Relations Based on Ordinary Partnership, 4th Edition, İstanbul, 2016, p. 284.

2 Dr. Sıtkı Anlam Altay, Capital Contribution Joint Ventures in Law of Joint Stock Companies, İstanbul, 2009, p. 38.

3 Barlas p. 285.

4 Altay p. 39.

5 Altay p. 48.

6 Dr. Kemal Dayındarlı, Joint Venture Contract, 2nd Edition, Ankara, 1999, p. 54.

7 Barlas p. 291.

8 Altay p. 49.

9 Dayındarlı p. 54.

10 Altay p.49.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on Mondaq.com.

Click to Login as an existing user or Register so you can print this article.

Authors
 
Some comments from our readers…
“The articles are extremely timely and highly applicable”
“I often find critical information not available elsewhere”
“As in-house counsel, Mondaq’s service is of great value”

Up-coming Events Search
Tools
Print
Font Size:
Translation
Channels
Mondaq on Twitter
 
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
 
Email Address
Company Name
Password
Confirm Password
Position
Mondaq Topics -- Select your Interests
 Accounting
 Anti-trust
 Commercial
 Compliance
 Consumer
 Criminal
 Employment
 Energy
 Environment
 Family
 Finance
 Government
 Healthcare
 Immigration
 Insolvency
 Insurance
 International
 IP
 Law Performance
 Law Practice
 Litigation
 Media & IT
 Privacy
 Real Estate
 Strategy
 Tax
 Technology
 Transport
 Wealth Mgt
Regions
Africa
Asia
Asia Pacific
Australasia
Canada
Caribbean
Europe
European Union
Latin America
Middle East
U.K.
United States
Worldwide Updates
Registration
Mondaq Ltd requires you to register and provide information that personally identifies you, including what sort of information you are interested in, for three primary purposes:
  • To allow you to personalize the Mondaq websites you are visiting.
  • To enable features such as password reminder, newsletter alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our information providers who provide information free for your use.
  • Mondaq (and its affiliate sites) do not sell or provide your details to third parties other than information providers. The reason we provide our information providers with this information is so that they can measure the response their articles are receiving and provide you with information about their products and services.
    If you do not want us to provide your name and email address you may opt out by clicking here
    If you do not wish to receive any future announcements of products and services offered by Mondaq you may opt out by clicking here

    Terms & Conditions and Privacy Statement

    Mondaq.com (the Website) is owned and managed by Mondaq Ltd and as a user you are granted a non-exclusive, revocable license to access the Website under its terms and conditions of use. Your use of the Website constitutes your agreement to the following terms and conditions of use. Mondaq Ltd may terminate your use of the Website if you are in breach of these terms and conditions or if Mondaq Ltd decides to terminate your license of use for whatever reason.

    Use of www.mondaq.com

    You may use the Website but are required to register as a user if you wish to read the full text of the content and articles available (the Content). You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these terms & conditions or with the prior written consent of Mondaq Ltd. You may not use electronic or other means to extract details or information about Mondaq.com’s content, users or contributors in order to offer them any services or products which compete directly or indirectly with Mondaq Ltd’s services and products.

    Disclaimer

    Mondaq Ltd and/or its respective suppliers make no representations about the suitability of the information contained in the documents and related graphics published on this server for any purpose. All such documents and related graphics are provided "as is" without warranty of any kind. Mondaq Ltd and/or its respective suppliers hereby disclaim all warranties and conditions with regard to this information, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. In no event shall Mondaq Ltd and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use or performance of information available from this server.

    The documents and related graphics published on this server could include technical inaccuracies or typographical errors. Changes are periodically added to the information herein. Mondaq Ltd and/or its respective suppliers may make improvements and/or changes in the product(s) and/or the program(s) described herein at any time.

    Registration

    Mondaq Ltd requires you to register and provide information that personally identifies you, including what sort of information you are interested in, for three primary purposes:

    • To allow you to personalize the Mondaq websites you are visiting.
    • To enable features such as password reminder, newsletter alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
    • To produce demographic feedback for our information providers who provide information free for your use.

    Mondaq (and its affiliate sites) do not sell or provide your details to third parties other than information providers. The reason we provide our information providers with this information is so that they can measure the response their articles are receiving and provide you with information about their products and services.

    Information Collection and Use

    We require site users to register with Mondaq (and its affiliate sites) to view the free information on the site. We also collect information from our users at several different points on the websites: this is so that we can customise the sites according to individual usage, provide 'session-aware' functionality, and ensure that content is acquired and developed appropriately. This gives us an overall picture of our user profiles, which in turn shows to our Editorial Contributors the type of person they are reaching by posting articles on Mondaq (and its affiliate sites) – meaning more free content for registered users.

    We are only able to provide the material on the Mondaq (and its affiliate sites) site free to site visitors because we can pass on information about the pages that users are viewing and the personal information users provide to us (e.g. email addresses) to reputable contributing firms such as law firms who author those pages. We do not sell or rent information to anyone else other than the authors of those pages, who may change from time to time. Should you wish us not to disclose your details to any of these parties, please tick the box above or tick the box marked "Opt out of Registration Information Disclosure" on the Your Profile page. We and our author organisations may only contact you via email or other means if you allow us to do so. Users can opt out of contact when they register on the site, or send an email to unsubscribe@mondaq.com with “no disclosure” in the subject heading

    Mondaq News Alerts

    In order to receive Mondaq News Alerts, users have to complete a separate registration form. This is a personalised service where users choose regions and topics of interest and we send it only to those users who have requested it. Users can stop receiving these Alerts by going to the Mondaq News Alerts page and deselecting all interest areas. In the same way users can amend their personal preferences to add or remove subject areas.

    Cookies

    A cookie is a small text file written to a user’s hard drive that contains an identifying user number. The cookies do not contain any personal information about users. We use the cookie so users do not have to log in every time they use the service and the cookie will automatically expire if you do not visit the Mondaq website (or its affiliate sites) for 12 months. We also use the cookie to personalise a user's experience of the site (for example to show information specific to a user's region). As the Mondaq sites are fully personalised and cookies are essential to its core technology the site will function unpredictably with browsers that do not support cookies - or where cookies are disabled (in these circumstances we advise you to attempt to locate the information you require elsewhere on the web). However if you are concerned about the presence of a Mondaq cookie on your machine you can also choose to expire the cookie immediately (remove it) by selecting the 'Log Off' menu option as the last thing you do when you use the site.

    Some of our business partners may use cookies on our site (for example, advertisers). However, we have no access to or control over these cookies and we are not aware of any at present that do so.

    Log Files

    We use IP addresses to analyse trends, administer the site, track movement, and gather broad demographic information for aggregate use. IP addresses are not linked to personally identifiable information.

    Links

    This web site contains links to other sites. Please be aware that Mondaq (or its affiliate sites) are not responsible for the privacy practices of such other sites. We encourage our users to be aware when they leave our site and to read the privacy statements of these third party sites. This privacy statement applies solely to information collected by this Web site.

    Surveys & Contests

    From time-to-time our site requests information from users via surveys or contests. Participation in these surveys or contests is completely voluntary and the user therefore has a choice whether or not to disclose any information requested. Information requested may include contact information (such as name and delivery address), and demographic information (such as postcode, age level). Contact information will be used to notify the winners and award prizes. Survey information will be used for purposes of monitoring or improving the functionality of the site.

    Mail-A-Friend

    If a user elects to use our referral service for informing a friend about our site, we ask them for the friend’s name and email address. Mondaq stores this information and may contact the friend to invite them to register with Mondaq, but they will not be contacted more than once. The friend may contact Mondaq to request the removal of this information from our database.

    Emails

    From time to time Mondaq may send you emails promoting Mondaq services including new services. You may opt out of receiving such emails by clicking below.

    *** If you do not wish to receive any future announcements of services offered by Mondaq you may opt out by clicking here .

    Security

    This website takes every reasonable precaution to protect our users’ information. When users submit sensitive information via the website, your information is protected using firewalls and other security technology. If you have any questions about the security at our website, you can send an email to webmaster@mondaq.com.

    Correcting/Updating Personal Information

    If a user’s personally identifiable information changes (such as postcode), or if a user no longer desires our service, we will endeavour to provide a way to correct, update or remove that user’s personal data provided to us. This can usually be done at the “Your Profile” page or by sending an email to EditorialAdvisor@mondaq.com.

    Notification of Changes

    If we decide to change our Terms & Conditions or Privacy Policy, we will post those changes on our site so our users are always aware of what information we collect, how we use it, and under what circumstances, if any, we disclose it. If at any point we decide to use personally identifiable information in a manner different from that stated at the time it was collected, we will notify users by way of an email. Users will have a choice as to whether or not we use their information in this different manner. We will use information in accordance with the privacy policy under which the information was collected.

    How to contact Mondaq

    You can contact us with comments or queries at enquiries@mondaq.com.

    If for some reason you believe Mondaq Ltd. has not adhered to these principles, please notify us by e-mail at problems@mondaq.com and we will use commercially reasonable efforts to determine and correct the problem promptly.

    By clicking Register you state you have read and agree to our Terms and Conditions