DEEDS 101 – Demystifying the Deed

While the difference between a contract and a deed is taught at law school, it is difficult to appreciate the deed until you start practising and are faced with a situation where a contract would just not work. In practise, it is essential to know the difference between a contract and a deed and understand and the formal requirements of each.

Deeds 101 

A deed is seen as the most solemn form of legal instrument a person can make. A deed can be used for a number of purposes including most commonly:

·         transferring a legal interest, right or property; and

·         creating a binding obligation on a person or persons.

In most jurisdictions, a conveyance of land will not be valid unless it is done in the form of a deed. For most other agreements, parties can choose whether to draft a contract or deed. Usually the circumstances will dictate which form of agreement you choose.

Why use a deed?

1.       No requirement for consideration

For a contract to form there must be:

·         offer and acceptance

·         an intention to be legally bound; and

·         consideration.

Deeds are often used when it is difficult or impossible to meet the “consideration” requirement of contract formation, as consideration is not required for a valid deed to form.

For example, there is a type of deed called a “deed poll” which can bind the person who executes the deed, but does not require execution by the party who it is made in favour of. There would be a real issue of consideration if this kind of agreement was attempted in contract form.

2.       Overcome privity of contract problems

You may remember the doctrine of privity of contract from studying Contracts at law school. Under the doctrine of privity only the actual parties to the contract can acquire legally enforceable rights or incur legally enforceable obligations under it. For example, if a beneficiary of an obligation under the contract is a third party, the third party will be unable to enforce the obligation. There are some narrow exceptions to the doctrine including for contracts of carriage and for some insurance contracts. The doctrine of privity continues to apply to almost all contracts. A deed can be used to avoid privity of contract problems.

3.       Executing party is bound immediately

Deeds are immediately binding, and can bind a party who has signed, sealed and delivered the deed even before the other party has executed the deed (Vincent v Premo Enterprises (Voucher Sales) Ltd [1969] 2 QB 609). There are exceptions, such as if a conditional deed is executed, where the deed is stated not to come into existence until a particular condition has been satisfied. In contrast, a contract is only formed once there has been offer and acceptance and the other formalities have been satisfied.

4.       Extension of limitation periods

Court actions based on deeds generally have a longer limitation period than court actions based on contract. For example, in Queensland, a court action based on a deed is considered a “speciality” and the limitation period for a “speciality” is 12 years as opposed to the normal limitation period of 6 years (s10(3) Limitation of Actions Act 1974 (Qld)). Similarly, in NSW a plaintiff has 12 years to commence a cause of action based on a deed, as opposed to 6 years for a cause of action based on contract (s16 Limitation Act 1969).

 What are the formal requirements to create a deed?

At common law, a valid deed is required to be written on paper, parchment or vellum, sealed and delivered (Scook v Premier Building Solutions Pty Ltd [2003] WASCA 263 [22]). These requirements have been altered by statute in every jurisdiction. Due to statutory jurisdictional differences, the requirements of a valid deed vary from state to state. For the relevant legislation in your jurisdiction see:

·                                   ACT - Part 2.3, Division 2.3.1 (ss 219 – 222) Civil Law (Property) Act 2006 (ACT);

·                                   NSW - Part 3 (ss 38-51A) Conveyancing Act 1919 (NSW)

·                                   NT -  Part 6, Division 1 (ss 46-54) Law of Property Act (NT);

·                                   Queensland - Part 6; Division 1 (ss 44 – 53) Property Law Act 1974 (Qld);

·                                   SA - s 41 Law of Property Act 1936 (SA);

·                                   Tasmania - Part XI, Division 1 (ss 59-70) Conveyancing and Law of Property Act 1884 (Tas);

·                                   Victoria - Part II, Division 2 Property Law Act 1958 (Vic);

·                                   WA - Part II (ss 8-16) Property Law Act 1969 (WA).

You will note most of these requirements are contained in property statute. The requirements apply to all deeds within that jurisdiction, not just deeds concerning property. The common law concerning the deed developed closely with property law, and many land transactions must still be undertaken in the form of a deed.

The following are the requirements of a valid deed, attempting to cover all statutory regimes:

a.                   In writing

Unlike a contract, which does not necessarily have to be in writing, a deed must be written.

b.                  Sealed

At common law, a deed was required to be executed by seal. Sealing via the old method is no longer required under the statutory regimes, though is permitted in most jurisdictions. Under the statutory regimes, a deed is taken to be sealed if the deed is expressed to be a deed/sealed and has been executed correctly.

c.                   Signed

For an individual to execute a deed, they must sign the deed and have their signature witnessed by a person who is not a party to the deed and who will not gain a benefit under the deed. In Victoria, there is no requirement for the individual’s signature to be witnessed.

The requirements for a corporation to execute a deed are contained in s127(1)-(3) of the Corporations Act. An Australian company can be bound by the signature of one director (if a sole director company) or two or more directors or a director and a company secretary.

d.                  Delivered

Delivery refers to the intention to be bound, being ‘some conduct indicating that the person who has executed the deed intends to be bound by it’ (Monarch Petroleum v Citco Petroleum [1986] WAR 310, 355). Typically, this is evidenced by having the words ‘signed sealed and delivered’ in the execution block/s.  Some states have removed the common law requirement of delivery (SA, Tasmania, and WA), but a clause in the deed evidencing delivery is still required in most jurisdictions. If you forgot to include the words “signed, sealed and delivered” in your deed in a jurisdiction where delivery is required, this is not necessarily fatal. Some legislative regimes would accept correspondence or evidence of conduct confirming delivery has occurred.

How do I incorporate these requirements in my deed?

This is not a comprehensive checklist. A few things you should look for include:

1.       Use of language throughout the deed

Ensure you use the word “deed” in the heading, throughout the document and in the execution block state “executed as a deed” rather than using the word “agreement”.

2.       Clause evidencing delivery

Most jurisdictions still require delivery. Ensure you use the correct form of words in your jurisdiction, either as a section in the body of the deed or using the phrase “signed, sealed and delivered in the execution block.

3.       Consider jurisdiction

If you are creating a template deed that could be executed in multiple jurisdictions, you can either:

a. Have a provision in the deed stating which law will govern the deed. For example “this deed is to be construed according to the laws of [insert jurisdiction]”; or

b. Ensure the deed complies with the requirements of a deed in every Australian jurisdiction.

4.       Consider the unique nature of your deed

For example, if you are creating a deed poll, ensure you make it clear the deed is being executed as a deed poll. For example, before the execution block use the words “executed as a deed poll in favour of and legally enforceable by [insert party]”