What is a joinder agreement?
How do you add a new party to a contract?
What does a joinder clause look like?
In this article, we will break down the concept of joinder agreement so you know all there is to know about it.
We will define joinder agreement, we will look at when it should be used, what the joinder clause looks like, what is the difference between joinder versus joinder agreement and more.
Are you ready to find out!
Let’s get started…
Joinder Agreement
Definition
A joinder agreement is a type of contract used to add a new party to an existing contract rendering the terms and conditions of the new contract binding upon the new party as if it was a party to the original contract.
When the contracting parties know that they’ll need to add additional signatories to their contract, they can provide for a joinder process to allow them to document additional signatories in a quick and easy way.
For example, a partnership where the partners are signatories to a partnership agreement will find it useful to use joinder agreements to add additional partners and have them become signatories to the existing partnership agreement.
What is a joinder agreement?
A joinder agreement is a type of agreement that “joins” a new party to an existing agreement as if the new party was part of the original agreement.
In other words, the new party is “joined” into the original agreement.
There are many ways a contract can be amended or complemented using schedules, exhibits or amendments.
A joinder agreement is a way of adding an additional signatory to a contract.
For example, an LLC may use a joinder agreement to have a new member be bound by the terms and conditions of an existing operating agreement.
What’s notable with a joinder agreement is that you do not need all the original signing parties to sign along with the new party.
To illustrate this is another example, imagine an LLC operating agreement having 10 signatories and a new member is looking to join the LLC.
In this case, you don’t need the joinder agreement to be signed by all 10 signatories along with the new individual but rather only the new signatory will sign.
This makes the process much simpler for everyone.
When should you use joinder agreements?
You should use joinder agreements in cases where it is likely that your contract will have new parties in the future and the identity of such parties is unknown at the moment the contract is signed.
For example, a startup may issue shares to three founders who then enter into a unanimous shareholder agreement with one another.
However, those three founders are looking for additional key employees to whom they may issue stocks of the company.
That’s when they can use a joinder.
The joinder will allow them to issue stocks to new shareholders and have those individuals become a party to their shareholder agreement.
Using a joinder, you can quickly add a new party to your existing contract.
Joinder agreement sample clause
If you are looking to use the joinder process to add future parties to a contract, you must provide for a clause in your contract allowing you to do so.
A typical clause can look like this:
“The parties to this Joinder Agreement agree that any new person or entity (“New Person”) 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 (“Agreement”) and be deemed a signatory to the Agreement”
Then, in the exhibit you are referencing, you’ll add the template of your joinder agreement form for the New Person to sign.
Joinder agreement form
A person signing a joinder agreement is a person agreeing to be bound by the terms and conditions of an existing contract.
For example, if you are a new shareholder of a company and you are given a joinder agreement to sign, by signing it, you agree to be bound by the terms and conditions of an existing shareholder agreement.
Typically, a joinder agreement is presented in a short and simple joinder form.
Here is what the joinder agreement form looks like:
Joinder vs joinder agreement
Although many use the terms “joinder” and “joinder agreement” interchangeably, joinder is not the same thing as a joinder agreement.
Joinder is a document signed by a person to become a new party to an existing contract.
By signing a joinder, the new party agrees to be bound by all the same terms and conditions as the original contract and becomes a new signatory.
However, in some cases, a new party may not want to agree to “all” the same terms and conditions.
If the joinder provides for exceptions, substantive changes, exclusions or additions to the original contract, then we are working on a “joinder agreement” and not a “joinder”.
A joinder agreement is when the new party agrees to be bound by the terms and conditions of the original agreement with some modifications, exceptions or additions to some terms.
Also, a joinder agreement is signed by the new person and the legal representatives under the original agreement.
Here is an example of a joinder agreement:
Example use of joinder agreements
Joinder agreements are used to include a person or entity to a contract as if that new person was one of the original contracting parties.
In business, a joinder contract is quite useful in many situations.
Here are some examples of when you may use a joinder agreement.
Corporation shareholder agreement
When a person is issued stocks or equity in a corporation, a joinder agreement is used to make the new shareholder a party to an existing shareholder agreement.
The more a corporation grows and issues shares to new stockholders, the more it may be relevant to use joinders to ensure that all new stockholders abide by the proper terms and conditions.
LLC operating agreement
When a person becomes a new member of an LLC, a joinder agreement is used to make the new member a party to an existing LLC operating agreement.
Joinders will make it easier for an LLC to add new members to its base while easily documenting their addition to the LLC operating agreement.
Partnership agreement
When a person becomes a new member of a partnership, a joinder agreement is used to have the new partner become a party to an existing partnership agreement.
A larger partnership may have some turnover in its members where some join and some leave.
If a partnership considers movement in its member base, a joinder will simplify the process of adding new partners to the partnership.
Subcontractor agreements
Another example is with regards to subcontractor agreements.
The primary contractor may have a contract with a client allowing it to subcontract certain aspects of the contract.
However, the client may require a joinder to be entered into with the subcontract to ensure that the subcontractor becomes a signing party to the original contract.
When the subcontractor signs a joinder, it becomes responsible for the same terms and conditions as the primary contractor towards the client.
Although this may not happen often, it is a scenario that allows for joinder to be used.
Joinder agreement NDA
A joinder agreement is a document further to which a third party becomes a party to a contract.
Generally, for a third party to become a party to a contract, he or she must be given the opportunity to read that contract and fully understand its terms and conditions.
After all, the third party is required to be legally bound by such terms.
To provide a copy of the original agreement to the third party, you’ll need to enter into a joinder agreement NDA.
A joinder agreement NDA is essentially a non-disclosure agreement providing for the confidentiality of the information exchanged in the process of having a third party joined into the original contract.
Joinder agreement FAQ’s
Is a joinder agreement an amendment?
A joinder agreement is not the same thing as a contract amendment.
An amendment is a process used to make substantive changes to the terms and conditions of a contract.
On the other hand, a joinder is used for the sole purpose of adding a new party to the contract without changing the terms and conditions of the original contract.
Who needs to sign a joinder agreement?
A joinder agreement should only be signed by the new member or new party to the contract.
You do not need all the signatories to the original contract to sign the joinder agreement.
For example, a company has a shareholder agreement with 4 signatories.
The company issues stock to a fifth shareholder and wants to have that new stockholder be bound by the shareholder agreement.
A joinder agreement will be signed only by the new shareholder and will legally result in the addition of a new party to the original shareholder agreement.
What is the meaning of joinder?
Joinder is a document pursuant to which a third party is “joined” into a contract as if the person had been an original signing party.
Limited liability companies often use joinders to add third parties as new members.
When a new member signs the joinder, that person becomes bound by the terms and conditions of the LLC operating agreement as if it was an original signing party.
What does the joinder of parties mean?
The joinder of parties means that certain parties wish to be bound by the same terms and conditions of an already existing contract.
For example, a corporation may have a shareholder agreement in place between all its shareholders.
By issuing shares to a new stockholder, the new stockholder will be required to become a party to the existing shareholder agreement.
That’s when we say that there should be a joinder of parties.
In other words, the new stockholder who was originally a third party to the shareholder agreement will become a party to the shareholder agreement just like an original signatory.
