Joint Operating Agreements: Key Provisions, Common Areas of Dispute, and Minimizing Performance Risks

JOAs set forth provisions to govern specific operational partnerships between two or more organizations. They differ from joint ventures, in which two or more entities combine resources to create a third entity jointly owned by both. In joint operations, two or more organizations contribute resources and manpower to a specific project, in which each entity maintains its distinct identity and parts ways at the end of the project. JOAs enable multiple parties to share the risk and expense as well as the benefits of projects that one party would be unable to complete on its own.

Careless drafting of JOAs or focusing solely on economic outcomes during contract negotiations can be a grave mistake that leads to lost money and time, eroded goodwill, disputes, and litigation.

Counsel to parties negotiating JOAs must carefully consider each provision--including the description of operations, rights and responsibilities, term and effective date, and financial interests and expectations of each party--to minimize potential legal and practical challenges when trying to enforce the agreement.

Listen as our panel of transactional attorneys provides practical guidance in drafting the most important provisions of JOAs, shares insights for negotiating these provisions, and highlights the most common drafting pitfalls.