An agreement is a legal document that states the rights and obligations of the parties involved in it. It is a common practice in law and includes attachments to contracts or other documents for several reasons.
One such attachment used by parties in law to add a signatory authority is Joinder agreement. Read through the article to understand the meaning of Joinder agreement, when to use a Joinder agreement and types.
What is a Joinder Agreement?
Business and Legal Agreements are mandatory for smooth functioning of businesses. They are formed between two or more organizations. These contracts include Joinder Agreement. Joint Agreement is a legal document wherein a membership interest transferee is admitted as a member to it. Once the member is admitted through the Joinder agreement, he will be bound by the terms and conditions of the main document or contract.
LLC Joinder agreements are widely used by a corporate legal practitioner. Joinder agreements are used for adding members, mostly in stockholder agreement, operating agreement, and partnership agreement. Under operating agreements, it is a common practice among legal professionals and business owners to execute a simple Joinder Agreement for adding a new member to LLC in New York.
When Is a Joinder Agreement Executed?
As mentioned earlier, a Joinder agreement is an easy and simple way to add new members to an organization. A Joinder agreement creates an opportunity for including a new member of the company, partnership, LLC in the future, or at present. In other words, a Joinder Agreement opens doors for adding new parties in the future, whose identities are unknown at the time of executing primary legal documents. A Joinder is a quick way to add signatory authority to the existing legal documents.
In addition to this, a Joinder Agreement or personal agreement can also be used in connection with subcontracts or agreements. Sometimes the original or primary contract between parties may allow either of the parties to delegate some of its contractual obligations to a third party. This can be done only if the subcontractor signs a Joinder Agreement to the primary contract. A Joinder agreement ensures that the subcontractor is also the subject of the original agreement and is bound by its terms.
What Is the Difference Between the Amendment and the Joinder Agreement?
In legal terms, an amendment makes changes to the original agreement; on the other hand, a Joinder Agreement does not make changes to the original agreement. Technically if you require making substantial changes to the original agreement, it is recommended to execute an amendment. Any kind of change to the body of the contract or agreements calls for amendment.
On the other hand, a Joinder Agreement is executed to add an additional person or entity to the original agreement. It is a simple document that brings in a new member who becomes a signatory authority and is subject to the terms and conditions of the original agreement.
One other difference between an amendment and the Joinder Agreement is that under the Amendment, all parties to the contract need to sign it for its execution. But a Joinder agreement to be valid and executed needs to be signed only by the new member. A Joinder Agreement saves time and effort as one need not track down all signatory authorities to the original document for its execution.
For Instance: if a corporation wants to bring in a new shareholder or if an LLC wants to bring in a new member, both LLC and corporation can execute a Joinder agreement and get it signed by the new member to make it legally binding without worrying about tracking down all its other members.
Pre – Requirement for Executing a Joinder Agreement
One important condition for executing a Joinder Agreement reference to the provision of Joinder in the original contract. The original contract or agreement must clearly include a provision stating that for adding any new member or entity to the agreement, a Joinder agreement must be signed and executed.
It is important that at the time of drafting an original agreement or contract that has legal binding to include a provision on Joinder agreement. Adding a provision on Joinder Agreement under an appropriate section or heading is necessary for its execution. A Joinder provision can be included under the section “Assignments of one party’s right” under the contract to a third party, admission of new member or entity or transfer, and delegation of responsibilities to the third party.”
Types of Joinder Agreement
Broadly speaking, Joinder Agreements are of two types, namely, Simple Joinder and Joinder Agreement with Special Provisions.
- Simple Joinder: This type of agreement is used by the corporation for adding or admitting a new member. This is simply attached as an exhibit to the original agreement or contract. A person or entity that is being admitted newly must fill the Joinder Agreement and sign it. A Simple Joinder Agreement must be delivered to the company for its records.
- Joinder Agreement With the Special Provision: This type of agreement is enforced by the companies or organizations on rare occasions. When a new member being admitted negotiates special terms that are different from the original contract, a Joinder agreement with the special provision is drafted and executed. Even in this situation, it is not necessary to execute an Amendment.
Joinder Agreement With the Special Provision can state how the meaning of a particular provision should be adjusted with respect to the new member. The agreement can also state the provision of the original agreement that doesn’t apply to the new member. Joinder Agreement With the Special Provision has to be signed by the new member along with other persons having a right to prove the amendment to the original agreement.
As mentioned earlier in the article, a Joinder Agreement is a quick way to bring with new members. The procedure in relation to executing a Joinder Agreement is quite simple. Once a signed Joinder agreement is delivered to the company records or to a company secretary, it is considered as part of the original agreement.
The new member is thereby subjected to the terms of the original agreement unless specially excluded by the Joinder Agreement.