A joint venture agreement is a legally binding contract entered into between two or more parties for a specific purpose. Generally, a joint venture agreement outlines the terms and conditions under which the venture will operate, including the exit clauses. The exit clause is an essential part of the joint venture agreement as it determines how the parties can terminate the venture.
A sample exit clause in a joint venture agreement should be clear, concise, and unambiguous. It should define the circumstances under which the parties can terminate the joint venture, the procedure for termination, and the consequences of termination.
The following is a sample exit clause in a joint venture agreement:
“Termination: This Joint Venture Agreement may be terminated by mutual agreement of the Parties. The Parties may also elect to terminate the Agreement in the event of:
(a) Any breach of any material provision of this Agreement by either party;
(b) The occurrence of an event that makes the completion of the Joint Venture impossible, such as a change in the law, or the loss of essential personnel, or other unforeseeable circumstances beyond the Parties` control;
(c) If, after the Parties have made good faith efforts to resolve any disputes, they have been unable to reach a mutually acceptable resolution.
The Party seeking to terminate this Agreement shall give written notice to the other Party stating the reason for the termination. Within ten (10) days of receipt of such notice, the other Party shall have the right to cure the breach that led to the termination, and if such breach is cured, the Agreement shall continue in full force and effect.
Consequences of Termination: Upon termination of this Agreement, the Parties shall settle all financial obligations and liabilities incurred during the term of the Joint Venture. Any unused funds or assets of the Joint Venture shall be distributed among the Parties in accordance with their respective ownership interests. The termination of this Agreement shall not relieve the Parties of any obligations or liabilities that have accrued prior to the termination.”
In conclusion, a sample exit clause in a joint venture agreement should be carefully drafted to protect the interests of all parties involved. It should outline the circumstances under which the joint venture can be terminated, the procedure for termination, and the consequences of termination. As a professional, it is essential to ensure that the clause is clear, concise, and free of any ambiguities that could lead to misunderstandings.
