When a Joint Venture Partner Walks Away: Protecting Your Public Works Contract in Bangladesh The problem: a partner walks out after the award
A joint venture partner cannot simply walk away from a public works contract once it has been signed. Yet it happens more often than contractors expect, and the partner left behind usually has days, not weeks, to protect the contract.
Picture a typical case. Two enlisted contractors form a joint venture to win a road improvement contract worth over Tk. 140 crore. The Notification of Award is issued, the performance security is furnished, both partners sign the Contract Agreement with the Roads and Highways Department, and the work order follows. Then, weeks later, one partner sends a legal notice and a sworn affidavit declaring that it has "unilaterally cancelled" the joint venture because "no work has commenced".
The remaining partner now faces urgent questions. Is the cancellation valid? Can it carry on alone? What happens to the contract, the performance security and its own standing with the procuring entity? At Justice Corner, we help contractors answer these questions quickly and act on the answers.
Can a partner leave the joint venture on its own?
In most cases, no. Once the contract is signed, the law and the joint venture agreement itself both stand in the way of a one-sided exit.
The contract is formed at award, not when digging starts. A Notification of Award typically states that it constitutes the formation of the contract. From that moment the joint venture is bound to the procuring entity as a single contractor. Mobilisation, site handover and stake-yard selection are part of performing that contract, so "no physical work yet" is not a ground to leave.
The Public Procurement Act, 2006 makes partners jointly and severally liable. Section 27(3) provides that persons forming a joint venture are jointly and severally liable to the procuring entity. No partner can contract out of that liability by its own declaration.
The Public Procurement Rules, 2025 lock the joint venture's composition. The new Rules came into force on 28 September 2025 and replaced the Public Procurement Rules, 2008. Under Rule 154(2)(a), anything done or ongoing under the old Rules is treated as done under the new ones, so the new Rules now govern most live contracts. Rule 70 then provides that:
each partner is jointly and severally liable for all liabilities and ethical or legal obligations under the contract (Rule 70(4));
the joint venture must nominate one representative to conduct its business and receive payments (Rule 70(5));
after the contract is signed, the joint venture may change only in special circumstances and with the prior approval of the Head of the Procuring Entity (Rule 70(9));
even then, only a partner other than the lead partner may be replaced, and the incoming partner must be better qualified (Rule 70(10)).
In other words, the Rules do not let a lead partner be replaced at all during execution, let alone withdraw by private notice.
The joint venture agreement usually agrees. Most agreements run until the project is accepted and accounts are settled, and end automatically only if the joint venture loses the tender. They typically require any amendment to be in writing and signed by both parties, and send disputes to amicable settlement and then arbitration. A unilateral cancellation that ignores these clauses is, in our experience, very difficult to defend.
How a joint venture agreement can be amended
A joint venture agreement can be changed only by the partners together, in writing, and, once the contract is signed, often only with the procuring entity's approval as well.
By mutual written agreement. Section 62 of the Contract Act, 1872 allows parties to alter or rescind a contract by agreement. Most joint venture agreements add that no amendment is valid unless it is in writing and signed by both parties. A letter from one partner alone is not an amendment.
In the same form as the original. An amendment should be executed like the agreement itself: on non-judicial stamp, signed by the partners or their legally authorised representatives (Rule 70(2) of the PPR 2025), and ideally notarised.
Through the management committee, where the agreement allows it. Some agreements let a committee with one representative from each partner take decisions or vary clauses. Because both partners sit on it, this route still needs both sides.
With the procuring entity's approval for changes in composition. After the contract is signed, adding, removing or replacing a partner needs the prior approval of the Head of the Procuring Entity, only in special circumstances, and never for the lead partner (Rule 70(9) and (10)).
With notice to the procuring entity for changes that affect it. A change to the authorised representative, signing powers or bank arrangements should be notified in writing, so that bills and correspondence are not questioned.
Rights and obligations of each partner
Every partner owes the procuring entity the whole contract, while between themselves the partners share rights and duties as their agreement sets out. The usual allocation is:
| Partner | Rights | Obligations |
|---|---|---|
| Every partner | Its agreed share of profit; information on the works and accounts; a say in management decisions; consent before any amendment or assignment | Joint and several liability to the procuring entity for the whole contract, through the defect liability period (Section 27(3) PPA, Rule 70(4)); its agreed share of losses; good faith towards the other partner; no assignment of its interest without written consent |
| Lead partner | Leads the joint venture in its dealings as the agreement provides | Meets the lead partner's minimum qualification (Rule 70(6)); stays in the joint venture for the life of the contract, since it cannot be replaced (Rule 70(10)); signs the contract and formal documents the procuring entity requires |
| Authorised partner or nominated representative | Conducts the joint venture's business and receives payments on behalf of all partners (Rule 70(5)); operates the joint venture bank account where the agreement says so | Accounts for payments to the other partner; acts within the authority the agreement gives |
| Partner furnishing guarantees | Indemnity or contribution from the other partner if a guarantee is encashed because of that partner's default, where the agreement provides | Furnishes the performance security and other guarantees on behalf of the joint venture as a whole (Rule 70(14)) |
Who is lead partner and who is authorised partner can differ. In many joint ventures, one partner leads on paper while the other runs the site and the bank account, which is exactly why clear drafting matters.
Why it is still dangerous, even when the law is on your side
Being legally right does not by itself keep the contract alive. The real risk is how the procuring entity reacts when a partner's withdrawal reaches its desk.
Contract termination. Under Section 64(6) of the Act, a procuring entity may terminate a contract where a fundamental term is breached.
Loss of the performance security. A terminated or stalled contract can lead to the security being encashed. The partner who furnished it, often the one left behind, bears that loss first.
Debarment of both partners. Under Rule 70(11), a declaration that a joint venture is ineligible applies equally to each of its partners. A partner that walks out can damage its own standing as well as yours.
Paperwork that stalls. Bills, variations and formal correspondence may need the lead partner's signature. A partner that refuses to sign can freeze payments even while the work continues.
A one-sided story. A sworn affidavit claiming that "no work was done" may be placed before the authorities. If it is not answered promptly with documents, it can shape how the procuring entity sees the project.
A court or arbitrator will rarely force an unwilling partner to keep working. The remedy is usually damages through arbitration, which is why protecting the contract with the procuring entity comes first.
Legal consequences of a unilateral termination
A unilateral termination after award usually has no legal effect on the joint venture's obligations, but it can still make the terminating partner liable.
The termination itself is likely ineffective. Where the agreement has no termination right and requires amendments to be signed by both parties, a one-sided notice does not change the agreement. The joint venture continues.
It is a breach, and may amount to repudiation. A partner that declares it will not perform refuses its promise in its entirety. Under Section 39 of the Contract Act, 1872, the other partner may then either keep the contract alive or put an end to it.
The terminating partner is exposed to compensation. Under Section 73 of the Contract Act, the partner in breach must compensate the other for loss that naturally arises from the breach, such as delay costs, mobilisation expenses or an encashed guarantee.
Its liability to the procuring entity does not end. Joint and several liability under Section 27(3) of the Act and Rule 70(4) continues until the works are taken over and the defect liability period ends.
The "partnership at will" argument rarely works. A terminating partner may argue the joint venture is a partnership that can be dissolved by notice under Section 43 of the Partnership Act, 1932. That section applies only to a partnership at will. A joint venture formed for a single project, with a fixed duration in its agreement, is a particular partnership that ends when the project is completed (Sections 8 and 42(b)), not at a partner's will.
False statements carry their own risk. A sworn affidavit that contradicts the contract record can expose its maker to further legal consequences, and it weakens the terminating partner's credibility in any later proceedings.
Legal recourse of the other partner
The partner left behind has several remedies, and the right choice depends on whether it wants to save the contract or exit with compensation.
Treat the termination as void and affirm the joint venture. Reply to the notice, reject the termination, and call on the terminating partner to withdraw it and continue performing. This is usually the safest route while the contract is running.
Negotiate an amicable settlement. Most agreements require the partners to try amicable settlement first. A settlement can keep the partner in, or agree an orderly exit that the procuring entity approves.
Refer the dispute to arbitration. If talks fail, the arbitration clause in the agreement applies under the Arbitration Act, 2001. The arbitral tribunal can award damages and declare the termination invalid.
Seek interim relief from the court. Under the Arbitration Act, 2001, the court can grant interim measures in support of arbitration, for example to restrain a partner from misrepresenting the position to the procuring entity or from dealing with joint venture assets.
Accept the repudiation and claim damages. Under Sections 39 and 73 of the Contract Act, the remaining partner may end the agreement and claim compensation. This route needs care, because it can weaken the joint venture's position with the procuring entity.
Work with the procuring entity. Seek written recognition of the implementing partner, keep the procuring entity informed with documents, and, where a non-lead partner truly cannot continue, apply for approval of a better-qualified replacement under Rule 70(9) and (10).
Courts rarely order a partner to keep working against its will, because the Specific Relief Act, 1877 limits specific performance of contracts that need continuous personal cooperation. In practice, the strongest protection is a combination: keep the contract performing, answer the termination on record, and keep arbitration and damages in reserve.
What to do if your partner sends a termination notice
The first two weeks decide most of these disputes. In our experience, these steps protect the contract best:
Keep performing. Never give the procuring entity a reason to find default on your side. Mobilise, start field work on schedule and keep the work program moving.
Build the paper trail. Send the Executive Engineer dated progress letters with site photographs, and keep the received copies with the office seal.
Reply to the notice promptly and calmly. A measured reply, through counsel, that sets out the facts and the law and invites a meeting is usually more effective than an aggressive one.
Secure written recognition of your role. Ask the procuring entity to acknowledge in writing which partner is implementing the work, especially if the other partner consented to that arrangement in a meeting.
Check what needs the other partner's signature. Identify bills, guarantees and correspondence that may stall, and look for any written authority or power of attorney already given.
Preserve your remedies. Keep arbitration under the joint venture agreement, and interim relief from the court, available if talks fail.
Prevention: draft a joint venture agreement that protects you
Most of these disputes are cheaper to prevent than to fight. When we draft or review a joint venture agreement, we make sure it covers:
Clear roles. Who is lead partner, who is authorised partner, and who signs bills, operates the bank account and deals with the procuring entity.
Who funds the guarantees, and how a partner that walks out compensates the one that furnished them.
A defined exit route that respects Rule 70(9) and (10): when a partner may leave, how the procuring entity's approval is sought, and what the leaving partner owes.
Deadlock and default clauses, so one partner's refusal to sign cannot freeze the project.
A fast dispute route, with named arbitration rules and a short timetable.
Compliance with the PPR 2025, including the Schedule-12 form for new joint ventures, adapted to your commercial terms.
How Justice Corner can help
Justice Corner advises contractors on public procurement and joint venture disputes, from the first legal notice to final settlement. We can:
review a termination notice or affidavit and advise on your position within days;
draft a reply that protects your rights while keeping the door open to settlement;
prepare correspondence with the procuring entity to safeguard the contract and the performance security;
negotiate with the other partner, or represent you in arbitration and before the court;
draft and review joint venture agreements before you tender, so the problem never arises.
If your joint venture partner has sent you a notice, or you are about to sign a joint venture agreement, contact Justice Corner today at [phone] or [email] for a confidential consultation.
This article is for general information only and is not legal advice. Every case turns on its own documents and facts, so please seek advice on your specific situation.