Tips on Understanding Business Terms

Here are a few tips that may help to demystify legal jargon and enable you to use business terminology more accurately.

Joint Venture / Partnership / Alliance

The terms joint venture and partnership have very serious legal implications. Unless you mean to use them in their true context, avoid the use of these terms. They will cause confusion in the other camp if they are used indiscriminately. A more general term that is less likely to provoke concern is “alliance”.

A joint venture is a legal arrangement that normally requires significant commitment from the participants. It generally connotes the incorporation of an entity in which the venturers are joint shareholders. Often the new entity is initially supported by shareholder contributions before it launches its own business. The subsequent profits are divided according to the equity held by each party.

Partnership is also a precise legal concept that means two or more persons working together with a view to making profits. The danger of entering into a partnership is that each partner has the power to bind the other partners. If one partner incurs a debt, the creditor can recover it from the borrowing individual or from any other partner.
In short, unless it is completely accurate, avoid the use of the word “partner” or any related terminology. A better term to use is “working together”.

Agreement or Contract

There is often confusion about whether a document is a contract or agreement. It is really the same thing and the terms are interchangeable.

Deed or Agreement

There is a legal difference between a deed and an agreement although there is not a great deal of practical difference, other than the name and the way the document should be executed.

A crucial reason to execute a document as a deed rather than an agreement is if there was concern over the existence of valid consideration. This is a fairly legal issue, so don’t worry too much. The key point is this: Don’t be overly perplexed by a document being a deed and not an agreement.