At its simplest, a deed is a promise that is not supported by consideration (payment). This means that to be valid, deeds must comply with much more specific requirements than contracts. You cannot simply infer the parties’ intentions to bound as you may be able to with a contract or agreement. This article explains the difference between an agreement and a deed under Australian law.

Definition of a Deed

deed is a special type of binding promise or commitment to do something.

The essence of a deed stems from the need in every community to have a special type of ritual or procedure which publicly indicates the solemnity of a binding promise that a person intends to make.

In today’s commercial world, this idea of a serious commitment continues in the form of a deed. Therefore people use a deed when substantial interests are at stake, such as when a person passes an interest, right or property.

The Difference Between an Agreement and a Deed

The fundamentals of contract law are that there must be:

  • offer and acceptance;
  • an intention to be legally bound; and
  • consideration.

Consideration stems from the idea that when two parties agree, they have reached a bargain. The parties need consideration to show that they have ‘bought’ the promise by doing some act or providing something in return for the promise.

In contrast with a contract or agreement, there is no requirement for consideration for a deed to be legally binding. A deed does not need consideration because of the idea that a deed is the most solemn indication that the parties intend to be bound.

Common Types of Deeds

  •   deed of termination;
  •   escrow deed;
  •   financial guarantee or letter of credit;
  •   deed poll;
  •   indemnity deed; and
  •   confidentiality deed.

Example: Tristan is lending money to Mani. Tristan requires Mani to provide a financial guarantee for the money. Mani’s parents provide a financial guarantee to Tristan on behalf of Mani. There may be no consideration between Mani’s parents and Tristan. Therefore, to ensure that the guarantee is binding even though there is no consideration, the guarantee is in the form of a deed.

Execution of Deeds

At common law, for an instrument to be a deed, the parties must comply with certain formalities:

  • the deed must be in writing;
  • a personal seal is placed on the document; and
  • it must be delivered to the counterparty.

These requirements are the origin of the expression “signed, sealed and delivered”.

However, in most cases, you should check legislation for specific requirements for creating a valid deed. These requirements are dependant on relevant laws for each state and territory and for the type of deed involved.

For example, in New South Wales (NSW), the Conveyancing Act 1919 provides that a deed passing an interest in property must be signed, sealed and attested by at least one witness not being a party to the deed (section 38).

It is important to refer to the legislation specific to your state as the failure to duly execute a deed means that the deed is unenforceable. The requirements for executing deeds are much more stringent than that for contracts. Therefore, you should seek specific advice if you are unsure about how to execute a deed or whether you need a deed for a particular situation.

Limitation Periods

A limitation period is the period of time that you can bring a claim to court after an event occurs. Many do not know that contracts and deeds have different limitation periods. In New South Wales (NSW) and Queensland (QLD), the limitation period to bring a claim to court for breach of contract is six years from the date of the breach. In comparison, under a deed, there is a 12-year limitation period.

Therefore, if you are dealing with a contractual dispute with another business, make sure that you understand whether the document at hand is an agreement or deed. Then, ensure that the limitation period does not lapse before bringing a claim to court.

Key Takeaways

A deed is a special form of document which indicates an individual’s most sincere promise to do something that she or he has contracted to do. At common law, the requirements for executing a deed are that it must be in writing, sealed and delivered to the other party. The key difference between an agreement and a deed is that a deed does not need consideration. Furthermore, each Australian state and territory has legislation that sets out specific requirements for executing a deed. You should check legislation to ensure that you properly execute your deed. If you have any questions or need legal advice about deeds or agreements, contact LegalVision’s contract lawyers on 1300 544 755 or fill out the form on this page.

About LegalVision: LegalVision is a tech-driven, full-service commercial law firm that uses technology to deliver a faster, better quality and more cost-effective client experience.

The majority of our clients are LVConnect members. By becoming a member, you can stay ahead of legal issues while staying on top of costs. For just $199 per month, membership unlocks unlimited lawyer consultations, faster turnaround times, free legal templates and members-only discounts.

Learn more about LVConnect

Lachlan McKnight
Need Legal Help? Get a Free Fixed-Fee Quote

If you would like to receive a free fixed-fee quote or get in touch with our team, fill out the form below.

  • By submitting this form, you agree to receive emails from LegalVision and can unsubscribe at any time. See our full Privacy Policy.
  • This field is for validation purposes and should be left unchanged.
Our Awards
  • 2019 Top 25 Startups - LinkedIn 2019 Top 25 Startups - LinkedIn
  • 2019 NewLaw Firm of the Year - Australian Law Awards 2019 NewLaw Firm of the Year - Australian Law Awards
  • 2020 Fastest Growing Law Firm - Financial Times APAC 500 2020 Fastest Growing Law Firm - Financial Times APAC 500
  • 2020 AFR Fast 100 List - Australian Financial Review 2020 AFR Fast 100 List - Australian Financial Review
  • 2020 Law Firm of the Year Finalist - Australasian Law Awards 2020 Law Firm of the Year Finalist - Australasian Law Awards
  • Most Innovative Law Firm - 2019 Australasian Lawyer 2019 Most Innovative Firm - Australasian Lawyer
Privacy Policy Snapshot

We collect and store information about you. Let us explain why we do this.

What information do you collect?

We collect a range of data about you, including your contact details, legal issues and data on how you use our website.

How do you collect information?

We collect information over the phone, by email and through our website.

What do you do with this information?

We store and use your information to deliver you better legal services. This mostly involves communicating with you, marketing to you and occasionally sharing your information with our partners.

How do I contact you?

You can always see what data you’ve stored with us.

Questions, comments or complaints? Reach out on 1300 544 755 or email us at info@legalvision.com.au

View Privacy Policy