The agreement between the investor and the contractor is made out in the form of a partnership agreement. Concerning the latest legislative changes, the partnership agreement protects not only the rights of the investor but also provides the rights to the contractor, who will directly carry out organizational work.
A partnership agreement is a document that confirms the relationship between the investor and the customer directly. In turn, the contract consists of obligations that are put forward by both parties. This concept was first used by the Supreme Court because there were cases when partners could not share profit among themselves. And after many incidents, they introduced the definition of a partnership agreement and even provided the first sample.
The investor and the contractor
The partnership agreement directly has two parties – it is the investor and the contractor. The contractor is the person who leads the project. He/She bears all responsibility for the funds provided by the investor and will undergo the process to fulfill all the points that contain his sample contract with the investor. The contractor is fully responsible for the result of the financial activities. The investor can be a legal entity or an individual who invests his funds to finance a project. The main goal is considered to be profitable for your contribution to the production or the service sector.
After the investor and the contractor have found each other, it is necessary to discuss all the conditions for concluding a contract, which should be suitable for both parties. The relations between the parties are built in such a way that the investor transfers money to the customer; meanwhile, all movements are documented by the legislation governing the relationship. In turn, this reduces the risk of the investor losing his investment. The contractor, in succession, invests all the money in the development of the project, while he is obliged to control all the processes of costs and profits.
investments can be paid in two main ways
- The contract indicates a fixed amount, and it is considered unchanged throughout the partnership project; payments must be made exactly on time. Of course, situations may periodically arise in which the customer cannot pay the money on time. In such cases, it is necessary to negotiate this case with the investor. With the consent of the depositor, it is possible to extend the payment period; however, this provision must be included in the partnership agreement.
- The payment, depending on the profit received, is also called approximate. Sometimes projects are long-term, and it is almost impossible to predict the exact profit. In this case, the approximate value of profitability is set, which can be adjusted in both directions. This variant of the investor is generally not happy because they want to know that their funds are protected and that they will receive the money they are counting on. For the customer, this option is good. This is because they can no longer guarantee the exact profit due to constant changes in the country’s economy. This is especially true for the profit rate of inflation, which over the years is becoming higher, especially in our country.
The process of transferring investments to the customer
- The first method includes that the parties sign an investment partnership agreement and the money is transferred to the contractor immediately by the established conditions.
- The second way is that the funds are transferred not immediately but in parts. It depends on various factors:
- The contractor at the stage of developing an investment project does not require the entire amount of money.
- The investor does not fully trust the contractor and thus tries to protect his funds from loss.
- This method is appropriate since the project for this period does not need to contribute the full amount.
All possible cash flows must be monitored by both the investor and the contractor so that in a conflict case the problem could be solved. Sometimes, such proceedings reach the court, and then confirmation of the operation is already required.
In the conclusion of the contract, the investor and the contractor would have to familiarize themselves with the current laws of the state, for it is necessary for proper execution. In such matters, it is important to know all the laws; this protects the future. For more confidence and acquaintance, they can consult with a lawyer. Such people are well acquainted with such cases and can explain many points that make it difficult to sign a contract. At the time of signing, they can provide the lawyer with a sample of the partnership agreement. He will be able to clearly outline the existing option and answer questions related to risk.