In Common Law, one of the most frequently asked questions is “what is a deed?”, and “what is the difference between a deed and an agreement?”
This article aims to answer the question of what is a deed, and explore the differences, if any, between a deed, and an agreement.
In simple terms, a deed can be defined as a “special type of commitment, or binding promise to do something.”
What Is A Deed: Subject Matter It Involves
The most important purpose of a deed or the most substantial requirement of a deed is that it should be intended by the executing party to be the most serious indication to the community that she or he really means to do what has been agreed between the two involved parties.
In other words, a it is considered to be a special type of binding commitment in a community, which indicates the seriousness of a promise made by the person.
What Is A Deed Used For?
Because a deed is a serious commitment between two parties, it is generally used when significant interests are at stake, like when a person passes a property, interest, or right.
Deeds are most often used for the following purposes: –
- To pass legal or equitable interests in property or some other rights
- To confirm an agreement that passes a legal interest in the property or some other rights.
- To create an obligation that is binding on some person
- To assign intellectual property between related companies
- To document an agreement that has been reached with another party after a dispute has occurred
- To provide a letter of credit, or provide a bank guarantee
- To make a non-disclosure deed to ensure that the other party does not share any of confidential information or details
- To transfer property like the sale of a house.
Differences Between Deed And Agreement
To understand what is a deed, it is essential to know the difference between deeds and agreements. Many people use it interchangeably, but it is not correct to do so.
In general terms, under contract law, there are certain requirements for something to be considered a ‘binding’ agreement. These include: –
- An offer to be made, and subsequently accepted by the other party
- An intention to be legally bound by the contract
- Promises and obligations must be a part of a ‘bargain.’ This means that there must be a bargain between the parties involved, in that the promise made by one party is considered, with a promise being returned by the other party, i.e., the other party makes a counter-promise for the promise made. This is termed as ‘consideration.’
The difference between a deed and an agreement lies in the last point stated above.
Firstly, as opposed to the way it is with contracts and agreements, there is no requirement for a deed to have ‘consideration’ or a bargain of promises/obligations between two parties.
This is because the very premise of a deed is for the executing party to make a solemn promise to their community that he/she sincerely means to uphold the promises made in the deed.
Secondly, another difference between the two is that when a party has signed, sealed and delivered the deed to the other party, it becomes binding on the party, even before the other party has executed it.
How Are Deeds To Be Executed?
Execution is the process of officially finalising the documents.
The formalities involved to execute a deed is as follows: –
- It must be written on paper, vellum, or parchment.
- A personal seal needs to be placed on the document
- It needs to be delivered to the counterparty
In short, for it to be executed it must be signed, sealed, and delivered.
One of the most important factors is that both parties must have the intention to be legally bound.
In addition to this, to execute a deed there are certain other rules to follow. Like if it is being executed by some party is about something personal, like a house deed, then there needs to be a witness when the it is being signed by the party.
For instance, in NSW, Section 38 of the Conveyancing Act 1919 states that:
“Every deed whether or not affecting property shall be signed as well as sealed, and shall be attested by at least one witness not being a party to the deed, but no particular forms of words shall be requisite for the attestation.”
Types Of Documents Commonly Executed As Deeds
If you are wondering what is a deed, you must also be wondering what are the documents that are executed as deeds. Some common documents include: –
- Financial Guarantee, also known as Letter of Credit
- Escrow
- Deed Poll
- Indemnity
- Deed of Termination, and
- Confidentiality
Limitation Periods
Limitation period is the period of time within which a claim can be brought to the Court in the event of a breach of an obligation set out in the deed.
In Australia, each state has a different limitation period, depending on the laws that govern the state.
For instance, according to the Limitation Act 1969, in NSW a claim following a breach of obligation must be commenced within 12 years from the breach occurring.
Similarly, in Queensland, the ACT, Northern Territory, Tasmania and Western Australia, the limitation period is 12 years. On the other, for South Australia and Victoria, the limitation period is 15 years.
Importance Of Legal Assistance
Now that you have understood what is a deed, and the various aspects that are related to it, you also need to know why it is important to seek legal guidance.
Whether you need guidance in execution, or with the court procedures in the event of a breach of the terms in the deed, our lawyers at JB Solicitors are here to help.
Our lawyers are experts in all matters concerning litigation and dispute resolution. Our team of experienced lawyers will help you every step of the way, and ensure that you receive the best possible outcome in your case.
Contact us today to have a confidential discussion with our friendly lawyers.
