In the world of contracts, you may have noticed that some are called deeds and others are agreements. The significant difference between deeds and agreements is whether each party has exchanged something under the contract.

Under an agreement, one party might provide a particular product in exchange for the other party providing money. In comparison, deeds are a unique form of document which indicates a party’s promise to do something. You should be careful to use the correct document for your particular arrangement, as they both have different signing requirements. This article will explain the difference between deeds and agreements.

What is a Deed?

Deeds are formal documents that show a sincere promise that you will fulfil your contractual obligations.

You will often need to use a deed if you are:

  • assigning intellectual property between related companies;
  • entering into a non-disclosure deed where you want to ensure that another party does not share your confidential information;
  • documenting an agreement that you have reached with another party after a dispute;
  • providing a bank guarantee or letter of credit; and
  • transferring property, such as the sale of a house. 

What is an Agreement?

An agreement, also known as a contract, is formed when:

  • there is an offer and an acceptance. For example, I offer to wash your car, and you agree to pay me $50 for it;
  • the parties demonstrate a clear intention to create legal relations; and
  • something is done in exchange for an offer. This is known as consideration.

The major difference between a deed and an agreement lies in whether there is any consideration for the promise. 

For example, if you are selling goods in exchange for money, then you will need an agreement. However, if you are merely providing the products for nothing in return, you may need a deed.

How Do I Execute a Deed?

Deeds and agreements have different requirements for execution. Execution is the process of formally finalising contractual documents.

For example, a document can be executed through both parties signing it.

If you are executing a deed, you will need to follow specific rules. If the deed is regarding something personal for you, like a house deed, someone must witness your signature. In comparison, however, if the deed is for a company, it will need to be signed by: 

  • two directors; or
  • one director and the company secretary. 

You will not need a witness if you are signing a deed for a company. Further, there is no need for the other party to sign the document. A deed is binding immediately once one party excutes it.

How Do I Execute My Agreement?

Agreements do not need to be ‘signed, sealed and delivered’ in the way that deeds must be. An agreement can technically be binding if it has been agreed to: 

  • in a contract;
  • orally; or
  • by writing in an email.

The essential factor is whether both parties had the intention to be bound by a contract.

However, it is best practice for agreements to be in writing and signed by both parties. This makes it very clear what terms the parties are agreeing to. Individuals may sign an agreement without having someone witness their signature. Similarly to a deed, a company may sign an agreement by:

  • two directors; or
  • one director and the company secretary. 

One huge practical advantage in using an agreement, rather than a deed, is that you can execute the document in counterparts. This means that you and the other party can both sign a copy of your own agreement, and then send it to the other side. Taken together, the two documents constitute the same agreement. This is particularly practical if you are not geographically near the other party.

Key Takeaways

Deeds and agreements are both types of contracts. However, they have different execution requirements, and you will use them for different kinds of contracts. Given that deeds have strict execution requirements, you must use the right type of contract so that you have a binding arrangement. If you need assistance drafting a contract, contact LegalVision’s contract lawyers on 1300 544 755 or fill out the form on this page.

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Lauren McKee
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