A Good Deed?

Published: 26/11/07

While the volume of agreements that your company has entered into may all appear to be the same, there is an important difference between those which are "simple contracts" (i.e. normally called "agreements" or "contracts") and those which are "deeds".
A properly drafted deed has important consequences for the parties and is generally entered into for two important reasons:


First, in English law, deeds are often entered into if there is a lack of "consideration" between the parti e s . "Consideration" describes the requirement under English law that in order for an obligation or right to be enforceable a party must give or promise something in exchange. So, for example, a simple contract pursuant to which one party indemnifies another for certain losses without receiving anything in return is likely to be unenforceable.
This can be avoided by executing the agreement as a deed and is a useful tool in those situations where consideration is far from clear (such as joint venture agreements or similar agreements at the early stages of transactions).

Limitation Period
Second, deeds benefit from a longer limitation period (the period in which actions can be brought by contracting parties) than simple contracts. The limitation period for a simple contract is six years from the date on which the cause of action accrued whereas the period is generally 12 years in the case of a deed.
This has obvious advantages but commercial parties will generally try to limit the period during which they are exposed. For instance, a seller will generally try to limit the period during which a claim can be brought by the purchaser for breach of warranty (often to a period considerably shorter than six years even). In these circumstances, the attraction of a 12-year limitation period offered by a deed will likely be limited.

Particular circumstances
There are also certain agreements which are required by law to be in the form of a deed (including certain property transactions and powers of attorney).

Signed, sealed and delivered
The phrase "signed, sealed and delivered" is a common adage but, in fact, is an ancient legal description of the formalities required to create an enforceable deed.
There are other formalities which must be satisfied including that it must be clear on its face that it is intended to be a deed. The wording "[Signed] [Executed] as a deed…" should be used before the execution block, for instance. same sites . Both signing and sealing a deed are still valid forms of execution today. An Englishregistered company can execute a deed under common seal, by two directors or by one director and the company secretary. For an individual it means that the signature needs to be independently witnessed. A deed also still needs to be "delivered" but that really means that the parties must "evidence an intention" to be bound by the deed (for example, making a statement to that effect or through conduct of the parties) rather than physical delivery as such.
There are a number of other complexities and peculiarities when it comes to the difference between simple contracts and deeds and particularly the form and use of deeds in certain circumstances. It should also be noted that in many foreign jurisdictions, the concept of a deed does not exist so it is essential that local legal advice is sought to avoid any potential complications.

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