As a business owner, it is extremely beneficial to make sure that you only enter into contracts that protect your business, legal, and financial interests. This includes knowing when a deed is required and is potentially more advantageous than a contract. Here we will explain the difference between a deed and a contract in business.
What is a deed?
We are often asked to explain the difference between a deed vs a contract. A deed is a formal legal document (which is always written) that confirms an agreement between parties whereby an interest, right or property, or a binding obligation is created or confirmed.
What is the difference between a deed and a contract?
A deed is similar to a contract, but there are some key differences as follows:
- deeds have to be written, whereas a contract can be verbal and written
- contracts require ‘consideration’ (i.e. something is given in return), deeds do not
- deeds must state that there is an intention to be a deed
- deeds have a statutory limitation period of 12 years vs six years for a simple contract
- certain transaction types have to be drawn up as deeds (see below)
- a deed involves more formalities to be completed when being drawn up compared to a simple contract. This includes requiring witnesses to observe its formation.
When must a written contract be executed as a deed?
Deeds are required in certain types of transactions, including:
- transfer of land
- leases
- appointments of trustees
- powers of attorney
- gifts of tangible goods
- releases and variations
In addition, deeds are often used where one party wants to remove any uncertainty as to whether valuable consideration has been given, or if there is a need to benefit from the longer limitation period of 12 years available under the Limitation Act 1980.
Employment contract as a deed
In some employment situations, it may make sense to enter into a deed rather than an employment contract. This may happen where the agreement contains a ‘power of attorney’ clause (as these need to be in the form of a deed). Power of attorney clauses may be added where the employer wishes to protect certain intellectual property rights. In addition, a deed can be used if there is no consideration as part of the agreement between the employee and employer.
Final words
If you require any assistance with a deed or contract, including which to use, to review an existing document, to recommend changes, or to draft an entirely new document based on your new contractual arrangement, speak to a commercial law specialist who will be able to handle this process for you. Doing so will minimise or remove any risk to your business.
Get legal assistance from LawBite
Our commercial lawyers can provide you with the legal advice, legal document templates and contract review services you need to ensure that agreements work in your favour, protecting you from potential legal disputes and expensive litigation.
If you have any legal issues regarding a deed or contract, you can book a free 15-minute consultation with one of our expert contract lawyer or us on 020 3808 8314.
