Design, Bargaining, and the Law
Chapter 9: Legal measures for finalizing bargains
Having discussed in detail the rationale behind JV partners’ incentive bargaining with each other (Chapters 2 and 6) and the subject matter thereof (Chapters 3–5 and 7), we now look at how partners legally finalize the results of their incentive bargaining. This is ultimately done in the form of a joint venture agreement between shareholders – an agreement which is negotiated through a step-by-step process (see Chapter 8 for details). A joint venture agreement’s content encompasses both (1) transactional agreements involving the joint venture’s business and (2) governance processes that constitute the JV company’s organizational management framework. Portions of the joint venture agreement are finalized and given legally binding effect and enforceability by the JV company’s charter/articles of incorporation, ancillary agreements, and laws that apply to the joint venture’s business organization form. When finalizing the details of the joint venture agreement, the parties should be aware of: (a) contract culture and draftsmanship, (b) incomplete contracts and relational contracts, and (c) binding effect and enforceability. We briefly summarize these issues below. Differences in contract culture and draftsmanship between Asian and Western companies can become an issue when Asian companies form business alliances with European and American companies.
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