THE DIFFERENCE BETWEEN DEEDS AND AGREEMENTS

Both deeds and agreements are instruments pursuant to which an agreement or deal is put in writing. There are however many differences between a contract and a deed and deciding which document is suitable depends on the circumstances.

What is a deed?

A deed is a binding promise or commitment to do something. A requirement of a deed is that the party executing or signing the deed has the intention to provide a serious indication to the public that she or he really means to do what was agreed to by the parties in the deed.

A deed may be used to transfer legal or equitable interests in property or some other rights, to create an obligation on a person or legal entity or to affirm an agreement that passes legal or equitable interests in property or other rights.

What is a contract or agreement?

A contract is an agreement between parties that can be enforced at law.

To have a legally binding agreement, under contract law certain criteria must be met:

1. There must be an offer and acceptance;
2. Both parties must have an intention to be legally bound;
3. There must be consideration given for the promise; that is, an act done (usually the payment of money), or counter-promise provided in exchange for the promise under the agreement;
4. The parties must have legal capacity to act; and
5. Both parties must provide free and genuine consent.

Execution of Deeds

Both deeds and agreements are a type of contract. There are however, different execution requirements for contracts and deeds.

Deeds are binding on a party once they have signed, sealed and delivered the deed to the other party, even if the other party has not yet executed the deed: Vincent v Premo Enterprises (Voucher) Sales Ltd [1969] 2 QB 609. If the person executing the deed intends for the document to be binding on them immediately then the court is more likely going to consider that the document is a deed.

The Queensland Court of Appeal in 400 George Street (Qld) Pty Ltd v BG International Ltd [2010] QCA 245 stated that where document contains the words “executed as a deed” and “by executing this deed” this clearly expresses an intention that the document is a deed and not an agreement.

Documents that are commonly in the form of a deed include Deed Polls, Confidentiality Deeds, Deeds of Termination and Indemnity Deeds.

Formal requirements of a deed

A key difference between agreements and deeds is that a deed may be binding even without consideration. Therefore, whether a deed is binding will depend on whether or not it is completed correctly. There a strict legislative execution requirements or formalities that must be met by individuals, partnerships and companies for a deed to be enforceable at law.

Traditionally at common law, to be a deed the document needed to comply with the following formalities:

1. It must be written on parchment, vellum or paper;
2. A personal seal was put on the document; and
3. It must be delivered to the counterparty of the deed.

Today, the execution of deeds is dealt with under the legislation of Australian states and Territories and the process of executing a deed differs for different business structures. Today, the common law requirement of sealing the deed no longer applies.

Executing a deed does not of itself mean that the deed has been delivered. The court will generally look at whether the party executing the deed intended to constitute delivery and this can be inferred by the court from any fact or circumstance including words or conduct.

To consider a document a deed, the court will look at matters including the following:

• Whether the document uses language commonly used in deeds, for example whether the document includes the phrase ‘by executing this deed’ in the execution section;
• Whether the document uses language generally used in agreements such as “covenants” and “consideration”;
• Whether the conditions for delivery are expressly outlined in the document; and
• Whether the circumstances indicate that the parties intended to be bound on delivery of the deed.

Limitation of Actions

The Limitations of Actions Act 1958 (Vic) governs the period of time in which a claim can be brought for a breach of contract in Victoria. In general, there is 6 years from the date of the breach occurring to make a claim for breach of contract. For deeds there is 15 years from the date of the breach occurring to commence an action for breach.

If you require legal advice about agreements or deeds, contact Alphastream Lawyers on (03) 9548 5500.