When are construction contractors considered joint ventures?

When are construction contractors considered joint ventures?

In A&A Electric Services, Inc. v. Jurado, the Second District Court of Appeal held that a joint venture is created when two or more persons combine their property and/or their time to conduct a particular line or trade or business deal.  2015 WL 5023126 (Fla. 2d DCA Aug. 26, 2015).  The party alleging the existence of a joint venture must prove: (1) a community of interest in the performance of the common purpose; (2) joint control or right of control; (3) a joint proprietary interest in the subject matter; (4) a right to share in the profits; and (5) a duty to share in any losses.

In A&A Electric, Jurado was the owner of an electrical contractor named Electric Machinery Enterprises (“EME”) and DeLaParte owned A&A Electric.  EME and A&A Electric had a working relationship where EME would obtain work and A&A Electric would assist EME in obtaining bonds for the jobs.  A&A Electric would hold the contracts and obtain the bonds and EME would prepare the bids and perform the work.

In 2006, the City of Cape Coral was soliciting bids for electrical work for two water treatment plants.  EME couldn’t obtain the required bond and did not have unionized workers so it could not perform the work for Cape Coral.  EME assisted A&A Electric in the bidding process and was paid $193,000.00.

When work began on the Cape coral Project, Jurado sent DeLaParte a letter stating: “This is to acknowledge receipt of $200,000 from Jaime Jurado for his 49% share of the Cape Coral jobs.  This letter was sent from Jurado’s personal  letterhead to the home of DeLaParte.  DeLaParte signed his name under the word “Accepted”.  A&A Electric paid Jurado back the $200,000 but refused to share any profits from the Cape Coral jobs.  Jurado sued A&A Electric.

Using the analysis on joint ventures listed above, the Second District held that there was no joint venture between Jurado and A&A Electric.  The court held that Jurado’s letter was with DeLaParte individually and not with A&A Electric.  Additionally, Jurado had no “joint control or right of control” over the projects because he had no authority to bind A&A Electric in any of its work, and A&A Electric had no authority to bind Jurado or EME.  Finally, Jurado had not duty to share in any losses sustained by the alleged joint venture.  Since Jurado could not prove every element required in finding of a joint venture, his claim failed and judgment was entered in favor of A&A Electric.

Construction contractors should pay careful attention to their relationships and prepare written documents demonstrating their intentions when working together.  If the parties intend to create a joint venture or to ensure that no joint venture is created, a written agreement should be used to clearly define the intended relationship.  This helps to avoid confusion and reduces the likelihood of future litigation when the parties are in dispute as to their legal rights.