A deed is a form of contract where a number of formalities need to be satisfied in order for it to be valid as follows: it must be in writing; it must be clear that it is intended to be a deed (“face value requirement”); it must be validly executed by the parties to it and it must be “delivered” (with a few exceptions). A deed is therefore distinct in form from a “simple contract” which may be just signed or even oral.
Face value requirement
This requirement is usually fulfilled by including the word “deed” in the document, preferably at the beginning e.g. “this deed is made on…”, and by including wording in the execution clause e.g. “signed as a deed”.
The correct execution formality for a deed depends on the party signing it. An individual must sign using that person’s usual signature in the presence of a witness (who must also sign).
A deed can be validly executed on behalf of a company in three main ways: by affixing its common seal, signing by two authorised signatories (for example, a director of the company and the company secretary) or signing by a director of the company in the presence of a witness who attests the signature. A party to a deed cannot witness the execution of the deed by the other party.
Delivery is an important feature of a deed because it fixes the date from which the signing parties are bound by it and, once delivered, the deed is irrevocable unless stated otherwise in the deed. A simple contract will generally take effect on the date of the last party signing, however the delivery of a deed can be made conditional on a particular event, or it may be unconditional. If unconditional, a deed will be presumed to be delivered and take effect on execution unless a contrary intention is proved. If subject to conditions, the deed will be delivered when signed but will not take effect unless the conditions are fulfilled. This is often referred to as the execution or delivery of a deed in escrow.
When is a deed needed or useful?
English law requires a limited number of contracts, such as transfers of land, mortgages and leases, to be in the form of a deed. Failure to do so may affect the validity of the relevant agreement or the transaction as a whole.
Even where not required by law, a deed may be chosen by the parties as the preferred contract form to take advantage of certain legal differences between them and simple contracts. Unlike simple contracts, deeds generally do not require consideration (money or money’s worth) to pass between the parties in order to be effective. This is often the most common reason for why an agreement is drafted as a deed. Another key difference is the time periods within which a claim can be brought before being time barred by law. Under a simple contract this period is six years whereas under a deed it is 12 years (unless agreed otherwise).