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What is a Deed and How Do You Execute One?

What is a Deed and How Do You Execute One?

Deeds can be important for any business or commercial transaction. This is the ultimate guide to deeds and their execution process.

4th November 2021
Reading Time: 10 minutes

You’ve spent months and weeks planning, organising or negotiating your commercial transaction and now you’re finally ready to put it in writing — it’s an exciting step. 

You could be creating a trust, transferring property ownership or bringing in new shareholders — no matter your transaction, you may find yourself asking ‘do I use a deed or an agreement?

It’s the golden question that follows many transactions and negotiations. That’s why knowing what deeds are and how to execute them can be of vital importance to both business owners and individuals alike.

Our comprehensive guide will take you through what a deed is and give you the tools you need to successfully execute any deed.

Let’s get into it.

Table of Content:

What is a deed?

At its core, a deed is a binding promise to do a certain thing.

As all deeds must be in writing and require very specific elements to be present, having a deed in place is an indication of a serious commitment.

Also, deeds are one of the most sincere ways to make a promise to someone. Why? Well, many deeds — especially those relating to land — are matters of public record.

So, in general, a deed stands as a public commitment that the parties to the deed will do what they promise to do. Of course, not all deeds are readily available to the public.

As most individuals or companies that enter into deeds have major interests at stake, entering into a deed is not something that should be taken lightly.

Arn’t deeds just agreements?

You may have heard the saying ‘a deed is an agreement, but not all agreements are deeds.’ 

This saying is 100% true. 

A deed is certainly a type of agreement. Both regular agreements and deeds stand as documented evidence of some promised transaction. So, in general, they have the same end effect — to document some legally binding promise. 

However, a deed is a special type of agreement as they are usually used when:

  1. A normal binding agreement would be inappropriate or unreasonable in the circumstances and,
  2. Where legislation requires it.

Regarding this first situation, it’s pretty common for deeds to be used as an alternative to regular binding agreements. Why? Well, where it is too difficult or unreasonable to make out the elements of an agreement, a deed is always your best option. 

So, even if you can’t make out a regular binding agreement, you’ll probably be able to make out a binding deed instead. Don’t worry, we go through this in more detail in the paragraphs.

Regarding this second situation, if a deed is required by legislation then it must be used over a regular agreement. Some common situations where deeds are legally required include:

  • Ownership transfers for real property or land
  • Bank guarantees 
Couple signing deed

Key differences between deeds and agreements

As mentioned above, both deeds and regular agreements have the same end goal — they both create legally binding promises. 

However, there are some vital differences between the two.

Our table highlights what these key differences are. 

ElementsAgreementsDeeds
Must be in writing
Offer and acceptance
Consideration
Intention to be binding
Legal capacity
Certainty in terms
Must be sealed
Must be delivered

As you can see, deeds don’t require any form of consideration. However, they must be in writing, signed, sealed and delivered. Of course, the opposite is true for agreements. 

When to use a deed over an agreement

These differences tell us something extremely important about deeds. It tells us when and why deeds are used in the first place.

Therefore, deeds are commonly used in situations where consideration doesn’t need to be given. In general, consideration means the monetary value given in exchange for the promise being made.

For example, if you enter a contract to buy a car from a dealership, the value of the car is the consideration you’ve given to receive your new car.

For regular agreements, a lack of consideration means that the agreement cannot be legally binding — it’s a pretty strict rule. 

However, sometimes consideration is just not necessary.

For instance, think of a trust. When you create a trust, you must have a written legal document outlining what money or property is held in the trust, who’s a trustee, beneficiary, appointer etc. But, it would be strange for either yourself, your trustees or beneficiaries to pay consideration for being a part of your trust.

As a result, deeds allow you to create legally binding contracts without the need to give or receive consideration. 

However, there’s a slight catch. Because consideration isn’t necessary for deeds, 3 additional requirements take its place — the “signed, sealed and delivered” requirement.

Find out more about this requirement in the paragraphs below.

How to execute a deed?

The word ‘execute’ is pretty old fashion in the legal world, so let’s quickly explain what it means.

To ‘execute’ simply means to create a legally valid deed. So, any deed that falls short of one of the execution elements may lack legal force.

Now, there are different execution requirements for both individuals and companies. Let’s start with individuals executing deeds first.

Individuals executing deeds

For individuals, executing a deed requires 4 important legal formalities to be present. This is where the “signed, sealed and delivered” requirement comes into play. However, executing a deed is a little more involved than this.

Put simply, each and every deed will be an executed deed when it is:

  • In writing
  • Signed by both parties and witnessed or attested by a third party 
  • Sealed 
  • Delivered

Each of these 4 requirements must be present, so think of it as more of a checklist to tick off when finalising your deed.

1. Deeds must be in writing

This requirement is pretty self-explanatory. Firstly, to execute a deed, it must be in writing.

Historically, there was a requirement that deeds had to be on parchment, vellum or paper. However, our law has moved away from this. So, just a simple paper deed will do the trick. 

What if your deed is in an electronic format? Does this affect your deeds validity? Even deeds in an electronic format, rather than printed on paper, can be valid deeds in writing. 

2. Deeds must be signed and witnessed

This is another simple requirement. Your deed must have each parties signature on it, as well as the signature of a third party witness.

In other words, the parties signing the deed must sign in the presence of a witness. That witness must also sign the deed to certify they watched the parties signatures take place.

Can you eSign a deed? In NSW, you certainly can. Since 2018, individuals have been able to use eSignature tools to sign deeds. Although, the ability to eSign deeds does not extend to companies. We go into this in more detail below.

3. Deeds must be sealed 

Historically, all deeds had to be phsycially sealed. The sealing had to occur with either a rubber stamp, wax or another form of impression. In fact, the idea was that the physical seal was a symbol of the parties intention to be bound together.

Fortunately, we’ve moved on from those days as wax or rubber seals are no longer necessary. Therefore, all you must do is ensure a third party witnesses and attested your deed.

Also, adding the terms “signed sealed and delivered by…[each parties signature]” at the end of a deed will combat any sort of ambiguity that may arise.

4. Deeds must be delivered

Contrary to the proper English meaning of ‘delivery’, delivery of a deed doesn’t require physical delivery or the handing over of a deed.

It’s a bit strange, but delivery actually refers to when the parties intended to be legally bound by their deed. This is determined objectively by the courts.

In general, it’s not an issue. Delivery or intention to be bound will be the date both parties (and witness[es]) sign the deed document.

However, you must take extra care in ensuring each of these elements are present and correctly made out. If not, your deed may lack legal force.

signing deed

Executing deeds for companies

All the legal elements referred to above apply to individuals who execute a deed. For companies, however, the rules are a little different. 

If you’re a director who wishes to execute a deed on behalf of your company, you’ll need to follow the rules laid out in section 127 of the Corporations Act.

According to section 127, there are a few ways a company can execute a deed. Let’s go through each below.

Method 1:

The first way applies to companies that don’t have a common seal. A common seal is a rubber stamp that carries the words ‘Common Seal’ together with the companies ACN or ABN. However, it’s pretty common for companies to not have one. 

So, if your company doesn’t have a common seal, the deed must written up and signed by either:

  • Two company directors or,
  • One company director and one company secretary or,
  • For proprietary companies: the sole directors who is also the company secretary.

Method 2:

This second route applies to companies that have a common seal.

If you’re using your company common seal, the deed must be in writing and the affixing of the seal must be witnessed by:

  • Two company directors or,
  • One company director and one company secretary or,
  • For proprietary companies: the sole directors who is also the company secretary.

As you can see, both routes are similar and involve the same sets of individuals. It’s up to you to choose which method to go with.

Now that you know how to properly execute them, what deeds may you be executing? 

Common types of deeds and when to use them

As mentioned above, there are certain situations that call for a deed over a regular agreement.

We understand this can be a bit tricky to follow so below we’ve outlined 3 of the most commonly used deeds and explained when you might use them. 

Discretionary Trust Deeds

It’s got a bit of an eye-saw of a name, but a Discretionary Trust Deed may be more relevant to you than you initially think. 

What is a discretionary trust?

Firstly, a discretionary trust is a type of trust that allows one or more people (or companies) to manage and hand out the benefits that belong to the trust. These ‘trust managers’ are the trustees. Now, the common benefits that belong to the trust are money or property, or both. 

The people who receive the money or property of the trust are the beneficiaries as they are the ones who, quite literally, benefit from the creation of the trust. 

Now, why is called a discretionary trust? 

Well, whoever you appoint as a trustee or trust manager will have the power to decide how much beneficiaries get and when they get it. In other words, the handing out of the trust’s benefits is up to the discretion of your trustee. So, it’s a pretty big responsibility. 

Discretionary Trust Deed template

Because of the large interests involved in this type of trust, a deed is a necessity. So, you’re wanting to start up or create this type of trust, then you’ll need a Discretionary Trust Deed.

Your Discretionary Trust Deed will cover:

  • Who your beneficiaries are
  • Who your trustees are, including their powers and responsibilities
  • Distribution of income and capital to beneficiaries
  • Removal and appointment of future trustees
  • Financial records
  • Winding up the trust
  • Signatures of both parties and a witness

If you’d like to set up a discretionary trust, you can use our customisable Discretionary Trust Deed template. 

Discretionary Trust Deed templateUse this template if:
discretionary trust deed template
  • You want to establish a discretionary trust

  • You want to gift property or money to beneficiaries

  • You’d like to create a discretionary trust as part of your will and estate
  • Deed of Release

    Got an employee who’s leaving and you want some protection from future disputes that could possibly arise? A Deed of Release is the way to go.

    Deed of Release is commonly used when an employment relationship is terminated, and for good reason. In general, this type of deed outlines what entitlements an employee will receive and which workplace duties and obligations will be terminated once the employee leaves. 

    Furthermore, this deed protects your business from any future disputes that may arise. It’s especially important to prevent any unfair dismissal claims from arising later on. 

    All in all, a Deed of Release ensures there is a clean break and that both your business and leaving employees are on the same page.

    Now, there are a few types of Deeds of Release, the one you use will depend on how your employee leaves your business. If your employee decides to leave or you’ve let them go for unsatisfactory performance, you may use a Deed of Release (Termination). However, if there’s a redundency, it’s best to go with a Deed of Release (Redundancy).

    Your Deed of Release should always include the following provisions:

    • Which employee is being terminated
    • Payments and entitlements they will receive
    • Which obligations and duties will be terminated 
    • How confidential information will be maintained or returned
    • How future disputes will be handled or restricted
    • Any other restraints that may apply
    • Signatures of both parties and a witness

    Deed of Release templateUse this template if:
    deed of release template
  • You wish to terminate an employee

  • You want to protect your business information and brand

  • You’d like to protect your business from future disputes
  • Gift Deed

    Wanting to give someone a substantial gift? You should consider executing a Gift Deed.

    This isn’t a necessity but if you’re giving someone an extremely valuable gift and you don’t want any misunderstandings, a Gift Deed can be extremely useful. 

    Your Gift Deed will outline:

    • Who is gifting the goods or property 
    • Who is receiving the goods or property 
    • Details of the gift
    • Declaration of ownership transfer
    • Signatures of parties and a witness 

    Gift Deed templateUse this template if:
    gift deed
  • You wish to give someone a substantial gift

  • You’d like the transfer in writing to avoid future misunderstandings and disputes
  • Looking for a specific document or want to browse through more deeds? Access our legal document library and get searching!

    Key takeaways

    A deed is a special type of agreement that creates a legally binding promise. They are commonly used when both parties have major interests at stake. For instance, in property and land transfers.

    Unlike normal agreements, deeds do not require consideration in order for them to be legally binding. However, you must follow strict execution rules in order to ensure your deed is binding. Accordingly, all deeds must be in writing, signed, witnessed, sealed and delivered. 

    Consequently, if your deed is missing one of these requirements, you run of risk of having an ineffective deed. It’s always best to speak with a lawyer before signing off on any deed.

    Don’t know where to start? Contact us on 1800 529 728 to learn more about customising legal documents and obtaining a fixed-fee quote from Australia’s largest lawyer marketplace.

    Author
    Mai Sarkissian

    Mai is a Digital Marketing Coordinator at Lawpath, working as part of the Content Team. She is in her final year of a Bachelor of Laws degree at the University of Wollongong. She is interested in Business Law and Employment Law.