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.

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.

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.

Aren’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

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.

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.

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