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What Is an Investment Agreement?

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  • Written By: Pablo Garcia
  • Edited By: O. Wallace
  • Last Modified Date: 27 November 2016
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An investment agreement is a contract stating the rights and responsibilities of two parties to an investment project. The investment contract sets out the structure and the nature of the investment. It specifies what money one party must pay to the other and the goods or services that are to be financed or produced from the investment.

The parties to the investment agreement can be individuals, partners, an individual and a business, or a company and a host country. Virtually any type of business venture can be the subject of the agreement. The parameters of the agreement are determined by the parties in the contract. However, the basic agreement form is the same for most projects.

The preliminary section of an investment agreement contract sets out the name of the investor and the individual, partner, or company that is accepting the investment. The nature of the project or enterprise is included in this section. It also sets out the amount of the investment and the “consideration” offered for it. The consideration is usually sharing in the profits of the enterprise or some similar benefit.

A method for repayment of the investment is included in the contract. The length of the agreement is also specified. Payment is usually a percentage of the profits. However, the parties can agree to any arrangement. Payments are generally linked to the duration of the agreement.

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Some contracts give the investor the right to be involved in significant decisions regarding the investment project. These can include decisions such as whether to expand or sell the enterprise, or the ways in which it should be promoted. Other forms of investment agreement do not include the investor in project decision making.

Investor rights to examine books and documents related to the financial operation of the project are generally included in the contracts. The methods for requesting document examination are specified as well. The ability of the parties to modify the agreement and the method for doing so are also addressed in the contract. Assignment of investor rights may be allowed or precluded by the agreement.

A concluding section recites the options available to the parties in case of legal disputes arising from the agreement. Most contain provisions about which state or country’s law will govern any legal dispute. Some agreements may have a mandatory dispute resolution clause. Most provide for attorneys’ fees to be paid to the prevailing party in any litigation arising from the investment agreement contract.

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