Ever wondered why these two animals exist? Here's the short version of what distinguishes deeds from agreements, and the reasons you might want to choose one over the other.
Agreements are documents that set out 'bargains' made between parties where one party promises something to the other party in exchange for something else. The giving of a promise under these circumstances is often referred to as 'consideration'. Deeds however are a type of promise or commitment that doesn't require anything in return. If you're receiving a gift and want to be able to enforce the promise, you need it written into a deed.
But wait! There's more.
To be properly signed, deeds have to be (in the words of Stevie Wonder) 'signed, sealed and delivered'. This has boring historical origins, the knowledge of which would only be useful to the parchment workers union, so we won't go into that here. What you actually need to know is that the signing of deeds is dealt with under State legislation so it's always best to check local State requirements to make sure you've signed your deed correctly.
But wait! There's even more.
Deeds are subject to longer limitation periods than agreements. Claims following a breach of contract must generally be commenced within 6 years from the breach occurring. By contrast, claims following a breach of a deed can be made within 12-15 years depending on the governing law of the document. This extended limitation period might make a deed the much better choice for certain types of commitments like confidentiality obligations, the termination of agreements or financial guarantees.
Overall we think deeds are pretty great, but they can be a little fussier to draft. If you decide to sign a document as a deed, make sure that the document, at a minimum:
- is clearly described as a deed;
- does not use language or concepts typically found in agreements, like 'consideration'; and
- sets out the conditions for delivery to the other party, as this will be the final step in ensuring that your deed is binding.
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