A deed of agreement is a special type of legally binding promise or a commitment to do something. Have you ever wondered why “agreements” refer to certain formal commercials? Do deeds and agreements mean the same?
Are they just different names for the same contract, or do they entail different duties and outcomes? In this article, we’ll discuss the meaning of deed and execution process for deeds. We’ll also discuss the key differences between deeds and agreements. This article will also outline some tips on how to avoid getting them mixed up.
The Difference Between Deeds And Agreements
Despite their similarities, there are two major distinctions between deeds and agreements. There are three requirements for making an agreement:
- There must be a person who makes the offer and another who accepts it.
- The parties must have the intention to be legally linked with each together.
- There should be a thoughtful exchange (something of value)
The first significant distinction is that creating a deed requires two conditions. These are:
- A party needs to make an offer;
- A party needs to express the desire to enter a legally binding deed.
Creating a deed doesn’t give consideration. For instance, selling anything for money requires an agreement. You may need a deed if you are giving something away that does not need consideration.
How To Avoid Confusing The Two
If there is a desired deed, the deed of agreement must define itself as such. This is to prevent confusion between an agreement and a deed. Here are factors that courts use to interpret documents as deeds:
- The wording used in the text is typical of deeds;
- The text avoids using terms like “covenants” and “consideration.” People use these terms in agreements.
- At the execution panel, the paper includes the sentence “by executing this deed”
- The paper specifies the delivery circumstances in detail; and
- The parties’ intention to be bound is evident from the circumstances surrounding the delivery.
Deed Of Agreement: What Is A Deed?
A deed of agreement is a type of legal instrument that expresses a party’s pledge to accomplish something. There are several sorts of deeds, each of which is unique to its own state or area. Importantly, a deed requires drafting, sealing, and delivering to the other party. This makes the deed valid under common law.
People frequently use deeds for transferring a property interest. The deed acts as a formal statement of intent to transfer property interest.
Additionally, a deed creates a fulfilled obligation. Even if there is no consideration, a deed of agreement becomes contractually obligatory. However, if you do not follow the rules set out by your local laws, you risk creating an unenforceable deed. Here are different types of deeds:
- Deed of confidentiality
- Deed poll
- Termination deeds
- Deed of escrow
- Letter of credit or financial guarantee
- Deed of indemnity
- Forbearance deeds
- Settlement deed
- Novation deeds
- Deed of release
There are 45 deed formalities according to the Property Law Act of 1974. It specifies making a deed of agreement doesn’t require formal words. However, the executing party must sign, seal, and deliver it with at least one witness. The names of the persons involved, the date, and any terms or covenants are also important.
Deed Of Agreement: Execution Of Deeds
How can a document become a “deed?”
- The document must be written on vellum, parchment, or paper;
- The document must contain personal seal;
- A party needs to deliver the document to the counterparty.
The phrase “signed, sealed, and delivered” comes from this. Each Australian state has different legislation that governs the execution of a deed of agreement. For example, Part 6 of the Property Law Act 1974 (QLD) governs deed execution in Queensland.
Corporate deeds of agreements require the signatures of two directors, or one director and the company secretary. There are no witnesses necessary. The deed becomes legally binding as soon as one party signs it. It makes no difference whether or not the other party has signed the paper.
The person who signs the deed must transcribe it and send it to the other party. If you’re signing a deed for reasons other than business, you should have at least one witness present. The witness must be over the age of eighteen and have known you for at least a year. They must give their entire name and address, and they cannot be a participant in the transaction.
Limitation Periods
A key aspect to remember is the time limit for filing a claim for breach of a deed’s obligation. Each state has its own legislation governing the time limit for filing a claim or bringing an action. Above all, the party must make a claim for breach of contract within six years of the violation happening.
However, because of their unique character, there is a longer amount of time to take action when a deed is breached (often referred to as “specialty”). Here are established time periods from state laws:
- 12 years in Queensland, New South Wales, the Australian Capital Territory, the Northern Territory, or Tasmania; and
- 15 years in Victoria and South Australia.
What Should I Choose Between The Two?
Here are factors to consider when considering whether to sign a document as a deed or an agreement:
- Whether there are any explicit corporate limits on deed execution. For example, certain delegated authorities prohibit business representatives from signing deeds on the firm’s behalf;
- Whether any third-party responsibilities are imposed;
- Tax consequences;
- Any issues with demonstrating consideration;
- Whether a deed can be performed in counterparts. For example, a technical issue based on the common law requirement that a deed be “delivered” to be effective; and
- The existence of specific remedies for the breach of a deed
Deed Of Agreement: Making Deeds With Legal Advice
Drafting up a deed is difficult as it involves complex financial situations. Our solicitors will back you up for all your legal procedures. Moreover, with our fixed fees, you can get the best jargon-free legal consultations regarding deeds and agreements.
Contact JB Solicitors today.
