Deeds vs Agreements                

You may have noticed that sometimes contracts are expressed as a Deed, whereas at other times they are expressed as a simple written contract (sometimes referred to as an ‘Agreement’).

What is the Difference?

Parties to an Agreement should remember that consideration must be provided. This includes money or goods and services, otherwise the Agreement will not be an enforceable contract. In stark contrast, Deeds do not require consideration and parties may often opt to have a Deed to avoid uncertainties surrounding the adequacy over their consideration.

Furthermore, the limitation period for Deeds and Agreements offer a further distinction. Thus, parties should take this into account when deciding which one to enter.

Parties that have entered into an Agreement have 6 years to bring an action for breach of contract. The 6 years commences from the date that the breached occurred, whereas, parties to a Deed are afforded 12 years.

The extended period may prove useful where an action for a breach needs to be brought against the offending party, however you do not foresee yourself making a full recovery within the 6 years due to the party not having sufficient assets or they have become insolvent. The offending party may become more financially stable within the extended period and will enable you to simply wait until you are more certain that you will make a recovery.

When is a Deed required?

There are certain instances where there is a statutory requirement to use a Deed, such instances include:

  • Land transfers.
  • Mortgages and charges.
  • Leases.
  • Sales by mortgagee.
  • Powers of attorney.
  • Appointments of trustees
  • Releases and variations.

The above list is not exhaustive. However, it should be remembered that a failure to use a Deed where required, may affect the legal validity of the document used.

Comments

It should be remembered however that additional formalities are required for deeds and not merely just a written signature.

Whilst there are occasions where parties must use a Deed, such as for the transactions above, in light of the lack of consideration needed and the extended limitation period, you may find it more advantageous to use a Deed for non-mandatory transactions.

Please note that the above does not constitute as legal advice. For information on deeds and contracts please contact Shubha Nath.

Share
This