What is an agreement?

A written agreement usually refers to an exchange between multiple parties, where one party provides goods/services to another party in return for ‘consideration’.

Elements of an agreement

To be legally enforceable, an agreement must include:-

1. An offer and acceptance of the offer;
2. An intention by the parties to be legally bound by the agreement; and
3. Consideration, which is some form of exchange of value from one party to the other. Consideration is a very broad term that can mean much more than just money (although this is the most common form of consideration).

Agreements are enforceable regardless of whether they are in written or oral form.

What is a deed?

A deed is a form of promise or commitment to do something. It indicates a party’s honest intention to follow through with what they have promised. It may be used to show a party’s intention to:

1. Create an obligation a party must act on; or
2. Transfer an interest in property.

Common types of deeds

Types of deeds include:

1. Deed of assignment;
2. Deed of termination;
3. Financial guarantee;
4. Indemnity deed;
5. Deed of variation;
6. Confidentiality deed.

How is a deed executed?

To be enforceable, a deed must be:-

• in writing;
• signed, sealed and delivered to the counterparty; and
• witnessed by someone who is not a party to the deed.

What are the key differences between agreements and deeds?

The main differences between a deed and a binding agreement are that:

1. an agreement may be made orally or in writing but a deed must be in writing; and
2. consideration is not required for a deed to be binding.

How does a court determine whether a document is an agreement or a deed?

This is often decided by considering parties’ true intentions. If the person executing a deed intends that the document will be immediately binding on themselves, it’s likely to be considered a deed.

Under contract law, agreements and deeds have different limitation periods. A limitation period is a set amount of time within which you can initiate legal proceedings if a dispute arises.

For a breach of contract, the limitation period is usually 6 years. A common limitation period for a deed is 12 years.

An agreement can be executed as a deed if it is signed, sealed and delivered.

Take Aways

Deciding whether to execute a deed or an agreement will depend on the circumstances of each case.

To show your intentions and avoid confusion as to whether a document is an agreement or a deed, use words explicitly showing the intention of the document. For example, specify that the document is “to be executed as a deed”.

When parties are unsure as to whether there is sufficient consideration, including the words “signed, sealed and delivered” ensures that the agreement is legally binding.

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