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What is a Joinder Agreement?
A joinder agreement is a legal contract used to add a new party to an original contract. Joinder agreements make the terms and conditions of the contract binding for the new party as if they were a party to the original contract. A joinder agreement therefore, adds new signatories to the contract in a quick and easy way.
The terms joinder and joinder agreement can mean two different things. Joinder agreements do not require all existing parties to sign along with the new party. Joinders are signed by the new party to become party to a contract.
A joinder agreement is signed by the new party as well as the legal representatives under the original contract. Only new members or parties need to sign the joinder agreement. All signatories need not sign the joinder agreement.
How Joinder Agreements Work
Joinder agreements are used in cases where it is likely that the original contract will have new parties in the future. The new parties don’t need to be determined while making a joinder agreement. For instance, if a business has three partners in a shareholder agreement with each other but they are looking for additional partners to join that contract or issue stocks to, they can use a joinder agreement. A sample joinder agreement clause in a contract can look like this:
“The parties to this Joinder Agreement agree that any new person or entity must execute a joinder form as outlined in Exhibit “X” to become a party to the shareholder agreement entered into by X and Y on DATE and be deemed a signatory to the Agreement”
A joinder agreement will allow them to issue stocks to new shareholders. The new party or new parties will become party to the original contract through the joinder agreement. So, when existing parties find new parties to join their agreement, they can ask the new party to sign a joinder agreement. Once the joinder agreement has been signed by the new party they will be legally party to the primary contract between all parties.
Joinder of claims is also often used to bring claims against the same party together by multiple parties in litigation. There are two main types of joinder of parties in such claims:
- Permissive Joinder: Permissive joinder allows multiple plaintiffs to if all their claims arise from the same transaction and if there is a common question of law relating to all claims.
- Compulsory Joinder: A compulsory joinder makes it mandatory for some parties to be joined. The Federal Rule of Civil Procedure 19 includes several reasons to determine a compulsory joinder such as if the party has an interest in the dispute that they will be unable to protect if they are not joined.
Here is an article on joinder agreements with more examples .
Key Terms in a Joinder Agreement
A joinder agreement has some mandatory clauses. These include the following:
- Date of signature: Date on which the joinder agreement was executed.
- Name and title of the new party: The basic information of the new party entering a contract needs to be listed in the joinder agreement.
- Agreement type: Is the joinder agreement a corporation shareholder agreement or a trust agreement? There are different types of joinder agreements used for different types of contracts. Joinder agreements will contain information about the type of agreement being made.
- Section that confirms the new person or member is a new signer of the deal: Joinder agreements will also contain a section naming new parties as they enter a contract. This will also keep track of old and new parties while all parties will be subject to the same terms and conditions laid out in the original contract.
- New member’s signature: The new party must sign and consent to the terms and conditions of the joinder agreement.
- Joinder party NDA: While not mandatory, a joinder party NDA is generally used in joinder agreements to protect the exchange of information. A joinder agreement NDA is a non-disclosure agreement ensuring that the confidentiality of the information exchanged in the process of having a third party joined into the original contract is maintained.
Here is an article on terms used in a joinder agreement.
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Examples of When Joinder Agreements Are Used
Joinder agreements are generally used in the following types of contracts:
- Trust agreements: A joinder agreement in case of a trust can ensure that new parties can be added to the trust at any point.
- Partnership agreements: Joinder agreement can be used when a new party joins a partnership. The new party can enter the existing partnership agreement through the joinder. A large partnership can often use this when some partners are leaving and new are joining the partnership agreement.
- Subcontractor agreements: A primary contractor will have a contract with a client that can allow subcontracting some or part of the contract. The client may use a joinder to ensure the subcontractor is party to the original contract and the terms laid out in the original contract upon signing.
- Commercial agreements: Joinders in commercial agreements allow new parties to engagement in commercial transactions or contracts.
- Founders agreements: Joinder agreements can be used to ensure more shareholders can join a partnership through the founders’ agreement . This generally happens in small companies.
- LLC operating agreements: A joinder agreement can be used when a party becomes a new member of an LLC. This would make the new party member to an existing LLC operating agreement .
- Corporation shareholder agreements: A corporation shareholder agreement is used when a person issues stocks or equity in a corporation. As a corporation grows and issues shares to new shareholder, it can use joinder agreements to ensure all stockholders abide by the terms and conditions.
- Mergers and acquisitions: In case of a merger or acquisition of a company, joinder agreements can ensure that shareholders will be subject to terms and conditions of the merger agreement.
Still unsure about the purpose of joinder agreements? Here is an article for you .
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