Articles
What Is A Deed?
Deeds are a specific type of legal document which requires and confer additional legal requirements and there are situations that require deeds rather than simple contracts.
The distinction between a deed and a typical agreement underhand can often be missed but nevertheless remains a crucial point to be understood before entering into any transaction. This article will elaborate on this distinction and how exactly one should execute a deed properly.
What is a Deed and When is it Used?
A deed, under UK law, is defined as a written legal document that passes, affirms, or confirms an interest, right, or property. Moreover, the transferred interest must be signed, attested, and delivered. Deeds are most commonly used when substantial interests are at stake, such as when a person passes an interest or property to another party.
An example of a deed in everyday transactions is most commonly be seen through the transfer of property, also called conveyancing. In order to execute a document as a deed, the signature of the person making the deed must be included within the ‘execution’ section provided at the end of the document.
In addition, the signature of the person executing the deed must also be witnessed in order to take legal effect. The witness’ name and personal home address must be included near the deed maker’s signature, typically directly under it.
In the case of the witness’ signature, it must be eligible and in print form so that he or she can attest to the transaction and the identity of the deed maker at a later date if need be. The witness contained within the transaction must not be a spouse or close relative to the deed maker; and best, not a life partner either. The choice of impartial witnesses who have no connection to the person who created the deed also contributes to the integrity and impartiality of the transaction categorization.
Some other instances when a deed may be used include:
- assigning intellectual property rights between related companies;
- entering into a non-disclosure deed or confidentiality agreement where you want to ensure that private information is not shared;
- documenting an agreement that you have reached with another party after a dispute;
- providing a financial guarantee or letter of credit; and
- transferring property, such as the sale of a house.
How Does a Deed Differ from an Agreement?
Alternatively, agreements, also known as contracts, are formed only when there is an offer and acceptance as well as a clear intention to create legal relations. This clear intention must also be affirmed by the consideration that arises when the party does something in exchange for an offer. As you can see, the major difference between a deed and an agreement lies in the presence of consideration for the promise which comes from the idea that since the parties have agreed to the exchange of an interest in something, the parties need to show that that they have ‘bought’ the promise by providing something in return, usually money.
In contrast, there is no requirement for consideration for a deed to be legally binding, and the reason for this derives from the idea that a deed itself is the most formal indication that the parties intend to be bound.
The Delivery and Execution
As mentioned previously, in order to bind a deed to the parties, the legal document must be signed, attested, and delivered. Prior to the leaps and bounds of modern-day technology, the requirement for delivery was far more stringent. It was previously necessary for the parties to confirm delivery by spoken words as well as physically handing the deed to the counter-party.
However, the process for legitimizing a deed has now become simpler as all that is required to show delivery is an intention to be bound by the deed. As such, it is sufficient to simply hand over the keys to the property being transferred, or demonstrate any other action that indicates an intention.
In a commercial context, if the deed is being used on behalf of a company, it will need to be signed by two directors or one director and the company secretary. In the instance of constructing a deed for a company as opposed to a personal deed such as the sale of a house, you will not need a witness or requirement for the other party to sign the document. Thus, such a commercial deed will be immediately legally binding upon its execution by the party making it.
What are the Advantages?
While the purpose of a deed and any other forms of agreement at large is to provide evidence for the transaction it relates to, using a deed specifically has its own advantages. Firstly, the requirement of a witness in executing deeds may provide the parties with an extra layer of assurance, making it very difficult for anyone to deny the legitimacy of the document or the fact that it was properly signed on the date that is given on the deed.
Moreover, the omission of consideration as a requirement of a deed may pose an attractive advantage for parties considering which form of an agreement to take. A deed is binding without the need for formal “consideration” which is the offering of value, most commonly seen in contracts through the handing over of money or the equivalent market worth.
Limitation Period
Another unique aspect and a further reason why it may be favored to contracts is that it bears a 12 year enforcement period for any breaches of terms within it as opposed to 6 years for agreements underhand. Limitation periods exist for all types of legal documents; it is typically interpreted as the period of time that a claimant can bring a claim to the court after an event such as a breach of contract occurs.
These limitation periods serve to protect defendants from claims stemming from an event that occurred after an unreasonably long period of time, when the administration of justice may become ambiguous and arduous due to how long it has taken for an action to be brought in court.
The special type of binding promise that a deed encapsulates can be seen every day in both personal and commercial transactions. When you are dealing with high-value substantial interests, it is crucial that you choose the correct form of legal document to demonstrate a formal commitment to the promise you are making to another party.
If you are unsure of whether you or your company should be entering into a deed or agreement for your next project, consult Zegal’s team of experienced experts to assist in explaining the difference between the two and which would benefit you the most.