At first, “deed vs agreement” may sound surprisingly the same, but there’s actually a difference between the two! These two words are commonly used interchangeably since they’re used when it comes to contracts between people. In legal understanding, deeds are enforceable in court to handle disputes, while agreements are mutual understandings between parties.
This article will delve into the differences between the two and give a few tips to avoid confusion.
Deed Vs Agreement: What Is A Deed?
Basically, a deed is categorised as a promise or commitment to do something. It emphasises the fact that the party has an honest intention of following what they promised. In a deed vs agreement, the matter of a deed can vary greatly.
For instance, it can pass or confer legal equitable interest regarding property and other rights. The deed also makes binding on a person or simply confirms an agreement that passes a legal equitable interest regarding property and other rights.
The following are types of documents that are often executed in the form of a deed:
1. Deed Poll
– Did you ever consider changing your identity for some reason? A deed poll is a legal document that provides a person the freedom of changing their name. However, one cannot change their name when they’re residing overseas.
2. Escrow Deed
– In understanding a deed vs agreement, it is worth noting that this deed indicates the temporary condition of money or properties that have been transferred to a third party. The transfer is usually done on behalf of buyers/sellers. Escrow is often related to real estate transactions, but it can apply to situations with funds that are being transferred.
3. Bank guarantees and Letter of credits
– Bank guarantees are promises from a lending institution that makes sure the bank will step up if a debtor can’t cover a debt. Letters of credit on the other hand are financial promises on behalf of a party in a transaction and are especially essential in international trade.
4. Deed of termination
– This deed is for parties who want to end a contract by consent. This provides options for dealing with the parties’ rights and liabilities
5. Deed of confidentiality
– A mutual confidentiality deed is used for parties that will be disclosing information to each other for commercial or transactional purposes.
6. Indemnity Deed
– This is a contractual agreement between a company and its director. It can help repay a director against liabilities or legal costs incurred in their capacity as a director.
Traditionally, deeds are executed like how we see them in shows or movies; it’s written on paper or special paper (vellum/parchment), stamped with a personal seal, and delivered to the concerned party. Click here, and see Part 6 of the Property Law Act 1974 on how deeds are executed.
Deed Vs Agreement: What Is An Agreement?
Now that we have a brief knowledge of what a deed is and how it works, let’s look at what an agreement is in a discussion about deed vs agreement. Generally, an agreement can be considered a contract. However, whether an agreement is legally binding depends on the instances of the agreement. Agreements are usually made in writing, but this is not necessarily the case always.
A written agreement usually refers to an exchange between several parties where one party will provide goods and services to another party in return for consideration. This ‘consideration’ is usually monetary and can be of any value. For an agreement to be legally enforceable, there must be an intention by the parties to be legally bound by the agreement and must include offer, acceptance, and consideration.
What’s The Difference Between The Two?
When we’re talking about the difference between deed vs agreement, it is important to note that there is no requirement for consideration in order for the deed to be binding. Deeds are more viable in court to handle disputes while agreements mostly focus on mutual understandings between two parties
If a deed is desirable in a situation, it is imperative certain conditions should be fulfilled. Some conditions on the document should use language commonly associated with deeds like the phrase ‘signed, sealed and delivered’ on the execution page. It must also indicate that both parties intend to be bound upon delivery.
Here are some considerations when deciding to execute a document in deed vs agreement:
- The time period in which a claim can be brought for the breach of an obligation set out in a deed
- If there are specific corporate restrictions on the execution of deeds
- If there are any obligations imposed on third parties
- If there are tax implications
- If there are difficulties in providing consideration
- Whether a deed can be executed in counterparts and the availability of particular treatments for the breach of a deed
Another takeaway in differentiating a deed vs agreement is the limitation period. A limitation period is the amount of time after a situation has occurred that a party can start with legal procedures. For a breach of contract, the period is usually 6 years after the breach. In terms of deeds and their different nature, it is common to find a limitation period of 12 years.
Tackling Both With Professional Legal Guidance
Generally, there are a lot of legal terms that our society doesn’t have knowledge of and a deed vs agreement is one of them. Deciding between the two in executing for legal purposes will depend on the circumstances of each case. Additionally, some states require that certain transactions must be executed by a deed in order to be valid.
Being unsure of what to choose between the two can be very tough for an individual especially when you are in a legal proceeding. JB Solicitors has a wide team of experts who specialise in preparing deeds and/or agreements to aid you in your contract needs. We offer fixed-fee pricing and money-back guarantee for our services to save you from your financial worries.
Contact JB Solicitors today