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Custody refers to the right to make the important decisions in a child's life:
decisions such as where the child goes to school, medical treatment, religious upbringing, and so on.
Sole custody is where one parent has the right to make these important decisions.
Joint custody is where both parents have the right to make these decisions.
A common misconception is that joint custody means that the children spend half the time with each parent. This need not be the case. The time that children spend with each parent is separately set out in an access schedule. Where the parents have joint custody and the children spend an approximately equal amount of time with each parent, this is known as shared custody.
What happens when parents in a joint custodial situation can't agree on something? Normally the separation agreement or court order will set out what needs to be done. Common examples are that the parents must attend mediation or binding arbitration to resolve the issue. As a last resort, the court will decide the issue.
Note that it is not necessary that both parents agree on everything for joint custody to work. The reality is that not even married couples are able to agree all the time, so much less so are divorcing parents.
Also, note that real disputes on custodial types of decisions are not as common as you may think. What is the chance that the other parent will want to change your children's religion? Are there really any disputes abuot what doctor your children should go to?
The biggest area for disputes in joint custody that I've seen relate to which school the children should go to: a private school or a public school, a Catholic school or a public school, and an English school or a French school.