witnessing or sealing) or when they take effect: a deed takes effect when it is ‘delivered’ not when it is executed, delivery being a legal concept which is centred on the signatory intending to be bound rather than physical delivery. The use of deeds can also be more complicated than the use of agreements due to additional requirements which may be imposed by law as to their execution (e.g. Nominal consideration can be provided for with a term to the effect that ‘Party A agrees to pay Party B the sum of $10.’Īnother difference between deeds and agreements is that deeds have a longer limitation period, being at least double that for a breach of an agreement in all Australian jurisdictions. The effect of that rule is to bar recourse to equitable remedies such as specific performance if there is no consideration given for a promise that is received. This is because of the rule that equity will not assist a volunteer. On the other hand, execution of the guarantee as an agreement could result in the agreement being unenforceable for lack of consideration.Īlthough consideration is not strictly necessary if a promise is contained in a deed, it is still common for at least a nominal amount of consideration to be included in deeds where there is otherwise no consideration. If the guarantee is executed as a deed rather than an agreement, any dispute about lack of consideration can be avoided. On the other hand, consideration is not necessary if the promise is contained in a deed.įor example, a third party guarantee of a loan will ordinarily be made by deed because arguably the guarantor does not receive any consideration from the lender for guaranteeing the loan to the primary borrower (unless the consideration is construed as being the benefit of the lender continuing to advance funds to the borrower, who the guarantor has an interest in supporting). Perhaps the most important difference is that a party seeking to enforce a promise made to it in an ordinary agreement (whether written or oral) must have provided consideration for the promise. However, there are important differences between deeds and agreements. The remedies for breach are also similar.
Used in this way, deeds share many similarities with agreements, including how they are interpreted, varied and discharged. The different legal rules are discussed in detail in the sections on Execution of Deeds, Execution of Agreements and Electronic Execution.īy way of background, deeds and agreements are both ways in which a ‘deal’ can be committed to writing by negotiating parties.
Further, all deeds only take effect when they are delivered (a legal concept focusing on when a party signing a deed intends to be bound) rather than simply executed. For example, unlike ordinary agreements, deeds executed by natural persons will generally need to be witnessed, a condition imposed by statute rather than common law (a point recently noted in Brown v Tavern Operatory Pty Ltd NSWSC 1290). There are different rules for each type of document and each type of person. the type of person signing the document (i.e.whether the document is a deed or an agreement and.The legal rules that apply to the execution of documents (and that ultimately determine whether an executed document is legally enforceable) depend on:
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