At its simplest, a deed is a promise that is not supported by consideration. As such, the intention of the parties to be bound by the deed cannot be inferred like it would be if the document were a contract.
What is a deed?
A deed is a special type of binding promise or commitment to do something.
The idea of a deed stems from the need in every community to have a special type of ritual, procedure or process which publicly demonstrates to that community the solemnity of a promise that a person makes and intends to be binding.
The most substantial characteristic of a deed is that it is the most serious indication to the public that a person really means to do what he or she is doing. In today’s commercial world, this idea of a serious commitment continues in the form of a deed.
Therefore, a deed is used when substantial interests are at stake – such as where a person passes an interest, right or property, or creates an obligation binding on a person.
Deeds compared with agreements or contracts
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 and consideration is required to show that the parties 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 to pass for a deed to be legally binding. Consideration is not required for a deed to be enforceable because of the idea that a deed is the most solemn indication to the community that the parties to a deed 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, so to ensure that the guarantee is binding even though there is no consideration, the guarantee is in the form of a deed.
How are deeds executed?
At common law, for an instrument to be a deed, certain formalities must be complied with:
- the deed must be in writing;
- a personal seal is placed on the document; and
- it must be delivered to the counter party.
These requirements are the origin of the expression “signed, sealed and delivered”.
However in most cases, legislation should be referred to for specific requirements on 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 NSW, the Conveyancing Act 1919 (NSW) 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’s 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 and it’s important to seek specific advice if you are unsure about how to execute a deed or whether a deed is required for a particular situation.
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.
If you want a fixed-fee quote to have any deeds, contracts or agreements drafted or reviewed, contact LegalVision on 1300 544 755.