CRITICAL ANALYSIS OF IMPORTANT FEATURES OF JOINT VENTURE AGREEMENT IN SINGAPORE CONSTRUCTION INDUSTRY

Abstract

Joint Venture (JV) is a fairly new trend in the Singapore construction industry; they can be considered as a relatively new contractual arrangement to contractors in Singapore. Therefore, it is imperative that contractors fully comprehend the true nature of JVs before they jump onto the JV bandwagon. However, there is a lack of a standard Joint Venture Agreement (JVA) template to serve as a guide for contactors in Singapore. Furthermore, there are already a few JV disputes in the local industry, most significantly the SembCorp Marine Ltd v PPL Holdings Pte Ltd case. In view of this problem, this paper has attempted to justify the importance of having a standard JVA template in the local construction industry. Thus, preliminary field research through surveys and interviews was conducted to gain insights into the industry’s practices and to understand the main issues faced by contractors in a JV. It was discovered that most of them only started entering into JVs in the last five years, suggesting that the JV is relatively new to them. Further, the respondents identified the most disputable clauses in the JVA as: (i) scope of parties; (iii) power of management team; and (iii) default clause. They also mentioned that having a guide for drafting construction JVAs would be useful to them. Next, case study research was conducted to analyze the JVA samples obtained from the interviewees. The samples were evaluated to determine if it contain the basic provisions required of a JVA. Then, the strengths and weaknesses of the three identified clauses were evaluated and attributes of a “strong” and well-written clause were derived. It was concluded that a “strong” clause in the JVA should be one that manages to avoid litigation by foreseeing possible sources of friction and adequately protects the partner's interest. Lastly, this paper provided recommendations on how should the three identified clauses be drafted in order to be able to provide for the commonly occurring contingencies in a JV. In a nutshell, this paper had adequately justified that a standard JVA will be useful to the local market and also highlighted the importance of having a “completed” JVA in order to minimize disputes in the Singapore construction industry.