Practical considerations for unincorporated joint ventures in construction projects

This article explores the recent judgment in Darchem Engineering Ltd v Bouygues Travaux Publics and another [2026] EWHC 220 (TCC). We highight what construction businesses should consider when deciding to enter into an unincorporated joint venture (“UJV”). Moreover, we consider the benefits and drawbacks of UJVs in major and smaller construction projects.

Background

The underlying contract was between contractor and a sub-contractor, both of whom were unincorporated joint ventures (“UJV”) for significant works at Hinkley Point C.

The contractor was a UJV between Bouygues Travaux Publics and Laing O’Rourke Delivery Limited (“BYLOR”).

The sub-contractor was a UJV between Darchem Engineering Limited (“Darchem”)and Efinor Limited (“Efinor”), later Framatome Limited (“EDEL”).

Clause 2.2 within the dispute resolution clause (Option W) provided that “any Party” may at any time refer a dispute to adjudication. Darchem issued proceedings against BYLOR in its sole capacity (i.e. not jointly, or on behalf of, EDEL) and had been successful in an adjudication award (“the Award”). Darchem was awarded a payment of circa £29.4M.

Darchem then brought enforcement proceedings against BYLOR, but BYLOR challenged the enforcement of the Award, citing that Darchem lacked jurisdiction. BYLOR contended that Darchem was not the sub-contractor. Rather, EDEL was the appropriate party to take carriage of the proceedings. Therefore, Darchem could not unilaterally bring proceedings on its own, against BYLOR, pursuant to the contract.

BYLOR was successful in its defence, and the TCC refused to enforce the Award.

Dispute considerations for joint ventures in construction projects

Ensure tailored dispute resolution clauses are carefully drafted to ensure that if it is the parties’ intention for each entity comprising a UJV should have the ability to invoke dispute resolution procedures, then the contract needs to clearly set them out.

If the parties are only defined between the UJVs, and not the individual partners, other contractual disputes will likely be interpreted in the same manner as the case discussed in this article (i.e. the UJV is the relevant party, and the partner cannot enforce the terms of the contract unilaterally). This includes where the contract expressly states that partners are jointly and severally liable. In the Darchem case above, the partners of EDEL were acting jointly and severally. However, the TCC found that Dachem and Efinor were acting as the “sub-contractor” and that their respective liability for the JV was joint and several (i.e. if EDEL were sued by BYLOR pursuant to the contract, and BYLOR were successful, both Efinor and Darchem would be liable to pay the award jointly and severally).

Drafting considerations for joint ventures in construction projects

The key here would be the definition of ‘party’ which came under dispute.

By becoming incorporated, you become a separate legal entity, meaning this entity can enter into contracts as a legal party. This removes the possibility, experienced in the case discussed above, that one partner of the joint venture is ultimately removed from proceedings and the ability to enforce adjudication. This means paying additional attention to the defined terms within the contract. Becoming incorporated (i.e. becoming a distinct legal entity in its own right), would assist to ensure that there are no ambiguities when defining the “parties” within the construction documents.

It is important to consider the key implications for becoming incorporated prior to doing so. These include:

• Drafting shareholder agreements which organise the level of value each entity has weighted in their membership
• The role of each shareholder will be tantamount to how assets and profits are managed
• Despite acting under the proviso that there is a corporate veil which protects the shareholders (or in this case the entities which make up the JV); in reality, further supporting contracts in the form of parent company guarantees can assist to offer liability from the joint venture partners to the Employer, offering the Employer further comfort against unprotected liability.

Key considerations for remaining unincorporated include:

• The relationship between each entity is balanced by individual contractual relationships, which may vary significantly
• There may be more control over the assets you bring to the partnership, but more limited control over pooled assets depending on how contractual relationships are formed
• Sharing liabilities will be determined contractually as well as termination of the separate agreements, which may pose significant risks to the project.

It will be important to consider the risks imposed by each method of organising JVs. Our expertise in the construction team means we are practiced at looking at larger projects where JVs are often a mechanism for sharing liabilities where the contract values are large, or the projects have a high complexity. In these instances, understanding which additional documents you might require to secure your JV is critical in securing agreements which appropriately balance liabilities.

Thomson Snell and Passmore’s construction team has experience advising contractors and investors on large infrastructure project throughout the entire project cycle, and we regularly advise contractors on construction litigation, adjudication, and arbitration.