Here are a few tips that may help to demystify legal terminology so you can cut through the jargon. I hope these tips help you to use business terminology more accurately.
Joint Venture / Partnership / Alliance
The terms joint venture and partnership have very serious legal implications. Unless you mean to use them in their true context, avoid the use of these terms. They will cause confusion in the other camp if they are used indiscriminately. A more general term that is less likely to provoke concern is “alliance”.
A joint venture is a legal arrangement that normally requires significant commitment from the participants. It generally connotes the incorporation of an entity in which the venturers are joint shareholders. Often the new entity is initially supported by shareholder contributions before it launches its own business. The subsequent profits are divided according to the equity held by each party.
Partnership is also a precise legal concept that means two or more persons working together with a view to making profits. The danger of entering into a partnership is that each partner has the power to bind the other partners. If one partner incurs a debt, the creditor can recover it from the borrowing individual or from any other partner.
Given that serious potential liability, the term ‘partner’ is not a word to use lightly.
In short, unless it is completely accurate, avoid the use of the word “partner” or any related terminology. Its is cumbersome, but the better terminology is to talk about “working together”.
Agreement or Contract
There is often confusion about whether a document is a contract or agreement. There is a legal difference that relates to consideration and other fine detail. The sort of stuff that only gets lawyers excited.
Both documents are the same thing and the terms are interchangeable.
Deed or Agreement
There is a legal difference between a deed and an agreement, although there is not a great deal of practical difference. One difference is the way the document should be executed.
Another crucial reason to execute a document as a deed rather than an agreement is if there is any concern over the existence of valid consideration.
Both points are the sort fine detail that only gets lawyers excited. Both are important though, so do get advice.
The key point is this: Don’t be overly perplexed by a document being a deed and not an agreement. For general purposes, both documents have the same effect and the terms are interchangeable.
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About Mark Toohey
