JOINDER AGREEMENT: How It Works

joinder agreement

Parties to a contract can use attachments to documents for a variety of reasons One of such contracts is the joinder agreement. However, a joinder is an attachment that parties use for the specific purpose of adding a signatory to an agreement. In this post you’ll discover how the joinder agreement works and who signs the form.

What is a Joinder Agreement?

A joinder agreement is a legal contract that allows a new party to be added to an existing contract. Joinder agreements make the contract’s terms and conditions binding on the new party as if they were a party to the original contract. A joinder agreement, on the other hand, quickly and easily adds new signatories to the contract.

The terms “joinder” and “joinder agreement” might refer to two distinct things. Joinder agreements do not necessitate the signature of all existing parties in addition to the new party. The new party signs a joinder to become a party to a joinder agreement contract.

The new party as well as the existing contract’s legal representative signs the joinder agreement. The joinder agreement is only required for new members or parties. The joinder agreement does not have to be signed by all parties.

Joinder Agreements and How They Work

Joinder agreements are utilized when it is expected that new parties may be added to the original contract in the future. The agreement does not require the additional parties to be determined. For example, if a company has three partners in a shareholder agreement with each other but wants to add other partners to that contract or issue stocks, they can use a joinder agreement. In a contract, a sample joinder agreement clause might look like this:

“The parties to this Joinder Agreement agree that any new person or entity must execute a joinder form as specified in Exhibit “X” in order to become a party to the shareholder agreement entered into by X and Y on DATE and be considered a signatory to the Agreement.”

A joinder agreement will allow them to issue fresh shares to existing shareholders. Through the agreement, the new party or parties will become parties to the original contract. As a result, when current parties locate new parties to join their agreement, they might request that the new party sign a joinder agreement. Once the new party has signed the agreement, they will be legally bound by the primary contract between all parties.

Types of Joinder Agreement

Claim joinder is also frequently utilized in litigation to bring various parties’ claims against the same party together. There are two primary types of party joinder in such claims:

  • Permissive Joinder: Permissive joinder allows several plaintiffs to file a single lawsuit if all of their claims originate from the same transaction and there is a common question of law affecting all claims.
  • Compulsory Joinder: A compulsory joinder requires some parties to be joined. The Federal Rule of Civil Procedure 19 provides numerous factors for determining a compulsory joinder. This includes the party’s interest in the dispute, which they will be unable to safeguard if they are not joined.

When should one use the Agreements?

Joinder agreements should be used when it is possible that your contract will include new parties in the future and the identity of those parties is unknown at the time the contract is signed.

A startup, for example, may offer shares to three founders, who then sign into a unanimous shareholder agreement with one another.

Those three founders, on the other hand, are looking for additional key personnel to whom they may issue business equity.

That’s when a joinder comes in handy.

The joinder will allow them to issue fresh shares to new owners and have those people become parties to their shareholder agreement.

You can simply add a new party to an existing contract by using a joinder.

Examples of Joinder Agreements in Use

Joinder agreements are commonly utilized in the following contract types:

  • Trust agreements: In the case of a trust, the agreement can ensure that new parties can be added to the trust at any time.
  • Partnership agreements: When a new member joins a partnership, the agreement is employed. Through the joinder, the new party can enter the current partnership agreement. When some partners leave and new ones join the partnership agreement, a large partnership can frequently employ this.
  • Subcontractor agreements: A primary contractor will have a contract with a client that allows for a portion or all of the contract to be subcontracted. The client can utilize a joinder to verify that the subcontractor is a party to the original contract and the terms spelt out in the original contract when it is signed.
  • Commercial agreements: Joinders in commercial agreements allow additional parties to enter into commercial transactions or contracts.
  • Founders’ agreements: The agreements can be used to ensure that more shareholders can join a partnership through the founders’ agreement. This is common with small businesses.
  • LLC operational agreements: One can utilize it when one uses an LLC for the first time. This adds the new party to an existing LLC operating agreement.
  • Corporation shareholder agreements: When a person issues stocks or ownership in a corporation, a corporation shareholder agreement is employed. As a corporation grows and issues shares to new shareholders, joinder agreements can be used to ensure that all stockholders follow the terms and conditions.
  • Mergers and acquisitions: In the event of a company’s merger or acquisition, the agreements can ensure that shareholders are bound by the terms and circumstances of the merger agreement.

Sample Provision for a Joinder Agreement

If you want to use the joinder procedure to add future parties to a contract, you must include a condition in the contract that allows you to do so.

A typical clause would look something like this:

“The parties to this Joinder Agreement agree that any new person or entity (“New Person”) must sign a joinder form as specified in Exhibit “X” in order to become a party to the shareholder agreement entered into by X and Y on DATE (“Agreement”) and be recognized a signatory to the Agreement.”

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Then, in the referenced exhibit, include the template of your joinder agreement form for the new person to sign.

The Essentials of a Joinder Agreement Form

There are several mandatory clauses in the agreement. These are some examples:

  • Day of signature: The date the agreement was signed.
  • The new party’s name and title: The agreement must provide the basic information about the new party entering into a contract.
  • Is the agreement a shareholder agreement for a corporation or a trust agreement? There are various sorts of joinder agreements that are used for various types of contracts. Joinder agreements will include details regarding the type of agreement being formed.
  • The section confirming that the new individual or member is a new signer of the agreement: The agreements will also include a section in which additional parties are named as they come into a contract. This will also keep track of existing and new parties while subjecting all parties to the same terms and conditions outlined in the original contract.
  • Signature of a new member: The new party must sign and agree to the terms and conditions of the agreement.
  • Joinder party NDA: While not required, a joinder party NDA is commonly used in joinder agreements to secure the transmission of information. A joinder agreement NDA is a non-disclosure agreement that ensures the secrecy of information transmitted throughout the process of bringing a third party into the original contract.

Joinder vs. Joinder Agreement

Although many people use the terms “joinder” and “joinder agreement” interchangeably, a joinder is not the same as a joinder agreement.

Joinder is a document that a person signs in order to become a new party to an existing contract.

By signing a joinder, the new party agrees to be bound by all of the original contract’s terms and conditions and becomes a new signatory.

In other situations, though, a new party may not want to agree to “all” of the same terms and conditions.

If the joinder includes exceptions, substantive revisions, exclusions, or additions to the original contract, we are dealing with a “joinder agreement” rather than a “joinder.”

A joinder agreement is one in which the new party agrees to be bound by the original agreement’s terms and conditions with some revisions, exceptions, or additions.

In addition, the new person and the legal representatives named in the original agreement sign a joinder agreement.

Special Provisions or Exceptions for Joinders

In rare circumstances, a new party to the original agreement has negotiated unique conditions that either differs from the original agreement’s terms or exclude the joining party from certain obligations. However, it is typically unnecessary to use a formal amendment in these cases. The joinder might either expressly declare how the meaning of a certain provision should be altered with regard to such person or simply list the sections of the original agreement that will not apply to the joining party.

However, unlike a conventional joinder, which only requires the joining party to sign, this sort of attachment — because it affects the substance of the agreement itself — must also be executed by any party with the authority to accept amendments to the original agreement. As a result, this sort of document is regarded a joinder agreement (rather than a joinder). This agreement must include signature blocks for the remaining signatories.

Keeping Proper Records

Joinders are deemed to be a part of the original agreement once signed and delivered. As a result, any joinders should be sent to the company’s appointed secretary or record keeper and duly kept in the company’s books and records, together with the original agreement.

FAQs on the Joinder Agreement

Is a joinder agreement considered an amendment?

A joinder agreement is not the same as a contract modification.

An amendment is a procedure for making significant modifications to the terms and conditions of a contract.

A joinder, on the other hand, is used to add a new party to the contract without affecting the terms and circumstances of the original contract.

Who is Signs a Joinder Agreement Form?

A joinder agreement should only be signed by the contract’s new member or party.

The agreement does not require all of the original contract’s signatures.

A firm, for example, has a shareholder agreement with four signatures.

The corporation seeks to bind a new stockholder to the shareholder agreement after issuing stock to a fifth shareholder.

The new shareholder signs the joinder agreement and will legally add a new party to the original shareholder agreement.

What does the term “joinder” mean?

Joinder is a document that allows a third party to be “joined” into a contract as though they were the original signing party.

Joinders are commonly used by limited liability corporations to add third parties as new members.

When a new member signs the joinder, he or she is bound by the terms and conditions of the LLC operating agreement in the same way as the original signing party was.

What does party affiliation imply?

The word “joinder of parties” refers to the desire of certain parties to be bound by the same terms and conditions of an existing contract.

A corporation, for example, may have a shareholder agreement in place between all of its shareholders.

By issuing shares to a new stockholder, the new stockholder is obligated to sign the existing shareholder agreement.

That is when we suggest there should be a coalition of parties.

In other words, the new stockholder, who was previously a third party to the shareholder agreement, will become a party to the shareholder agreement in the same way that an original signing would.

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