Contractual joint venture is useful where the establishment of a separate legal entity is not needed or creation of such a separate legal entity is not feasible. Comment

The key characteristics of contractual Joint Venture are: Two or more parties have a common intention - of running a business venture. Each party will bring some inputs in the form of money or materials. Both parties exercises a certain degree of control on the venture. The relationship is not a transaction to transaction relationship but has a character of relatively longer time duration. The contractual Joint Venture might be used where the establishment of a separate legal entity is not needed or the creation of such a separate legal entity is not feasible in view of one or the other reasons. The two parties do not share ownership of the business entity but each of the two parties exercises some elements of control in the joint venture. The contractual Joint Venture agreement can be entered into in situations where the project involves a narrow task or a limited activity or is for a limited team or where the laws of the host country do not permit the ownership of property by foreign citizens. For the purposes of contractual JV, the relationship between parties is set forth in the contract or agreement concluded between them. The way a Joint Venture Company would carry out its operations is always based on the negotiations between the parties, the results of which are reflected in the joint venture agreement entered into between the parties. The licensing agreement, know-how agreement, technical services or technical assistance agreement franchise agreement and agreement covering all other commercial matters might even form annexes to the main joint venture agreement. They can be signed once Joint Venture Company is established. An example of a contractual joint venture is a franchisee relationship.