Oftentimes, the words deed and agreement are thought to be synonymous. However, this is not the case. This article aims to answer the question of “what is deed” by exploring its definition, its various types, and discussing certain key differences between deed and agreement.
What Is Deed?
The formal definition of deed is as follows: –
“A deed is a binding promise to do something.”
In the commercial landscape, it demonstrates serious commitment to perform certain duties, and/or obligations. It can be executed by a person or company.
Functions Of Deed
There are various function listed as follows: –
- It can pass legal interest in property, or any other rights
- It can create a binding obligation on a person
- It can pass equitable interest in property or other rights.
- It can be used to affirm an agreement that passes either legal or equitable interest in property, or any other rights.
What Is Deed: Different Types
To know what is deed, it is important to understand that it can be categorised under two main types, including: –
- Indenture Deeds. These are made between two or more parties with each party representing different interests. For instance, a deed of release is a type of indenture deed.
- Deed Poll. These are usually made by one or two persons – generally only by one person – where each party represents the same interest. For examples, a power of attorney.
Under these, there are different types including deed of: –
- termination
- indemnity
- forbearance
- settlement
- confidentiality
- guarantee
- novation
- release
- escrow
Requirements
A deed requires: –
- offer and acceptance of the terms of agreement as stated, and
- the intention of parties to be legally bound
Execution
Under general law, if a deed has to be binding, it must:-
- be in writing
- have a seal on the document
- be delivered to the other party in the deed
Traditionally, it was required to be in writing, on paper (or vellum, or parchment), sealed, and delivered in order to have the legal effect as desired.
However, over the years, the forms of deeds have changed. For instance, under Section 38 (1) of the Conveyancing Act 1919 (NSW), it is stated 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 form of words shall be requisite for the attestation.”
Execution By Individuals
In cases where the deed is being executed by individuals, it must include the individual’s name and their signature.
Many state legislations, like NSW, need witnesses for the signing of the deed. In states where there is no such legislation, it is still recommended that you have a witness, who can serve evidence of the execution.
What Is Deed And What Is Agreement
The main difference between a deed and an agreement is that a deed does not require consideration (any price – usually money) for it to be legally enforceable.
On the other hand, an agreement requires consideration that is usually asked by the party, in exchange for their commitment to fulfil the obligations stated in the agreement.
Under contract law, the key aspects of an agreement include: –
- Identified parties who are involved in the agreement;
- Offer and acceptance (need not be written – can be oral);
- Consideration (usually in the form of money);
- Certainty of terms; and
- An intention to form a legal relation by parties
To summarise, there are two key differences between a deed and an agreement:-
- A deed does not require consideration to be legally binding, whereas an agreement requires consideration to be provided by one party which is usually in the form of money
- An agreement need not necessarily be written, in that, oral agreements are also binding. However for a deed to be legally binding, it must be in writing.
When Is A Deed Used Over An Agreement?
Now that you have an idea about what is deed, it is essential to understand in which circumstances they are used over agreements.
Commonly, they are used: –
- wherever legislation requires that a deed be used.
- where a promise/ commitment does not need any consideration or payment.
- where there is a longer limitation period for a deed to be enforced.
- when a party wants a strict commitment, and wishes to make it more difficult for the other party to get out of their responsibilities, and obligations.
Breach And Limitation Periods
In case of breach of an obligation set out in the deed, it is important to know the limitation period, or the period of time in which a claim can be brought for the breach.
In Australia, each state has different legislation regarding the period of time in which a claim can be brought for breach of an obligation.
The particular time period depends on the law of the specific State – and the deed always has to specify which State law it is governed by.
- Generally, the limitation period is 12 years in New South Wales, Queensland, the Australian Capital Territory, the Northern Territory, Western Australia, and Tasmania; and
- The limitation period is 15 years in Victoria and South Australia.
Importance Of Seeking Legal Advice
This article has explored what is deed, including its various types, the requirements, and differences between agreements and deeds.
At JB Solicitors, our litigation lawyers can help you with all aspects related to deeds – be it with regards to execution, or court procedures, or termination.
Especially in matters concerning termination of deeds, great care must be taken. If not done so, you may incur great costs, and sometimes it can also lead to unnecessary disputes. To avoid such hassles, it is advisable that you speak with experienced solicitors.
Our expert and friendly lawyers will make the entire legal process as pain-free as possible, and ensure that you receive the best possible outcome.
Contact us for more specific information about deeds, agreements, or for any other legal advice.
