THE ENFORCEABILITY OF TYPICAL JOA DEFAULT PROVISIONS

Abstract

Courts will not always give effect to the terms of JOA default provisions which require forfeiture of a defaulting party's joint venture interest. However, given the nature of resource joint ventures, the circumstances in which relief against forfeiture will be granted are rare.

Forfeiture of a joint venture interest will not be enforced if it is penal in nature. Typical JOA forfeiture clauses are unlikely to be penal in nature as their primary object is to facilitate the continuation of the joint venture project.

If two or more alternative and inconsistent remedies are available to non-defaulting joint venturers, they must elect which remedy they wish to pursue. We do not believe typical JOA default remedies present inconsistencies which require an election.

In recent years, Australian courts have demonstrated a willingness to imply terms of reasonableness into contracts to avoid a harsh or unjust outcome. We do not expect this trend to affect typical JOA default clauses.