As a result of the COVID-19 pandemic, the Government introduced several measures to address the difficulties many businesses face. One of those measures was an exception to the requirement that a person signs a deed with wet ink. For many businesses, the ability to sign a deed electronically was a welcome change that simplified this process. This is especially the case for parties that could not sign the deed in the same location. Whilst initially temporary, these measures are now permanent by amendments to the Corporations Act 2001 (Cth).
Difference Between an Agreement and Deed
The two main types of contracts are:
- agreements; and
- deeds.
The primary difference between a deed and an agreement is that for an agreement to be legally enforceable, you must give the other party something of value in consideration for their promise. Typically, the value would be in the form of money. For example, Cate pays Carl $50 to clean her car.
On the other hand, a deed only requires a promise or commitment to do something. There is no requirement for consideration.
Common examples of deeds include:
- bank guarantees;
- intellectual property assignments for no value between related entities; and
- deeds of settlement.
Formal Requirements When Signing a Deed
You must follow several formal requirements when executing a deed. These requirements ensure the deed is valid and enforceable. These include that the deed must:
- be in writing;
- have a seal on the document; and
- be delivered to the other party to the deed.
The deed will is deemed effective from the date it is ‘delivered’. Typically there is no requirement to deliver the deed document from one party to another.
Additionally, there are circumstances where you need to have a witness view the signing of your deed. For example, suppose you are signing a deed for a personal matter (as opposed to as a company). In some Australian states, you must sign the deed in the presence of a witness. That witness needs to be an individual who is not a party to the deed.
Further, for companies, either two directors or a director and a company’s secretary must sign the deed. There is no requirement for a separate witness to sign the deed when signed on behalf of a company.
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Can Companies Sign a Deed Electronically?
Before the COVID-19 pandemic, another formal requirement in most states was that a party must sign a hard copy of the deed with wet ink. However, due to the pandemic, there have since been some changes introduced. Although these changes were previously temporary, the Corporations Amendment (Meetings and Documents) Bill 2021 made these changes permanent.
Notably, companies can now electronically sign deeds under the Corporations Act, provided they meet several criteria.
When electronically signing a deed with another business, before relying on the other party’s execution under the Corporations Act, you must be satisfied that:
- you use a method to identify the person signing the document, and they indicate their intention to sign the document; and
- the method is reliable and appropriate for the purpose for which the document was generated or communicated, in light of all the circumstances. You can achieve this by using a reliable document execution platform such as Docusign.
Additional Considerations
The amendments to the Corporations Act allow companies to execute deeds electronically. However, you should still make additional checks to ensure that you or your company can electronically sign the actual type of document. Sometimes, State legislation may restrict electronic signing for particular documents.
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Key Takeaways
Due to recent permanent amendments introduced to the Corporations Act, companies can now sign a deed electronically, so long as they meet particular criteria. Notably, different states and territories in Australia follow an inconsistent approach to the signing of documents. Hence, it is prudent to obtain legal advice before executing a deed electronically so that you can ensure its proper and valid execution.
If you need help with executing deeds, our experienced contract lawyers can assist as part of our LegalVision membership. For a low monthly fee, you will have unlimited access to lawyers to answer your questions and draft and review your documents. Call us today on 1300 544 755 or visit our membership page.
Frequently Asked Questions
A deed is a type of contract. Usually, a valid agreement requires one party to give another party something of value in consideration for their promise. Typically, the value would be in the form of money. However, a deed does not require the element of consideration. Instead, a deed only requires a promise or commitment to do something.
Under the Corporations Act, companies can now electronically sign deeds, provided that they meet several criteria. This was previously a temporary measure introduced as a result of the Covid-19 pandemic. However, these measures have been made permanent following the introduction of amendments to the Corporations Act in February 2022.
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