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In the commercial world, a variety of terms – such as agreements or deeds – are used to refer to the legal promises you may make. Although both may appear to refer to the same promise or subject-matter, a deed and an agreement have different requirements to be legally valid and binding. You must be aware of these differences when entering into your particular arrangement. This article will detail what a deed and an agreement are, and the differences between the two. 

What Is a Deed? 

A deed, or ‘a document under seal,’ is a legal document that contains a binding promise or commitment. More often than not, this promise concerns the passing or affirming of an interest, right or property. 

In New Zealand, you may use a deed for: 

  • property ownership, such as buying a house, or selling it to a new owner;
  • a transfer of an interest in land, through a settlement deed; 
  • settling disputes or potential claims in court; and  
  • entering or leaving a position of status. For example, a trustee may only be able to retire or be appointed, by a deed. 

The reasons you may want or need to use a deed are because:

  • your circumstances may legally require you to use it. Selling your house, for example, is not valid unless its execution is through a deed;
  • you need to enter into a binding agreement where there is no “consideration” (usually payment);
  • it may be traditional in your line of dealings to do so; or 
  • you may wish to reap the benefits of using a deed over other document types. 

What Is an Agreement?

Although sometimes we call a deed a type of agreement, most often, when lawyers talk about an agreement, they mean a “contract”. A contract is a legally binding arrangement reached by two or more parties. 

To enter into a contract at common law, there must be:

  • an offer, for example, if your friend offers to bake you a cake;
  • acceptance of this offer, for example, you accept this offer to receive a cake;
  • something in exchange for this offer, which is also known as consideration. For example, in exchange for the cake, you will pay them $20 or promise to bake them cupcakes; and
  • a shared intention by the parties to enter into this agreement. 

Contracts can take many forms. However, so long as they meet the core legal requirements above (and some other minor technical ones), they will generally be binding if the parties have agreed to it:

  • in writing, through a written contract or email;
  • orally; or
  • through partly written and partly oral agreement. 

How Do I Execute My Deed?

Deeds and agreements have different execution requirements. Execution is the process which a party to a deed shows that they intend to be bound by it. Importantly, there is also no need for consideration in a deed. 

To demonstrate that you, as an individual, wish to be bound by a deed, you must follow specific steps:

  • the deed must be in writing;
  • you must sign it;
  • someone who is not a party to the deed must witness you sign it, and provide specific details about themselves including the name of the city they live in, and their current job or description; and
  • the deed must be delivered. That does not necessarily mean that there must be a physical delivery. Instead, it will be ‘delivered’ when it is apparent from the circumstances that the party intends to be bound by it. Alternatively, if your deed will only come into force on one or more conditions, it will be ‘delivered’ when these conditions are fulfilled. 

Similarly, if you are a company wishing to execute a deed, it must be signed in the name of the company by one or more of the company’s directors. If there is only one director, then another individual must witness its signing. If there are two or more directors, then at least two must sign it. 

Differences Between an Agreement and a Deed

There are two key differences between an agreement and a deed. We explain these differences below.

1. There Has to Be Consideration to Enter Into a Binding Agreement 

One of the requirements for a valid agreement or contract is consideration. This usually is an exchange of money, but can also be an exchange of services, a promise to do something or a commitment to refrain from doing something. Consideration may be thought of as a party to an agreement ‘buying’ the proposed offer. Consideration demonstrates that both parties intend to enter into the agreement.

Unlike in contracts, you do not need to provide consideration when executing a deed. This is one of its benefits.

Suppose you are entering into an arrangement where it is not clear that you are providing something of value in return. In that case, you may need a deed. For example, when giving up a court claim against someone without any exchange of money, you guarantee debt or assign property without a transfer of funds. If you are entering into an arrangement where you are provided with goods or services in exchange for money, you usually just need a contractual agreement. 

2. A Deed Has to Be a Written Document That Is Signed

As there is no exchange of consideration when executing a deed, it must be in writing and signed. This is to demonstrate that you intend to be bound by its contents. 

Although contractual agreements do not have to be in writing, it is quite useful if it is. This ensures that: 

  • the terms of the agreement are clear to both you, and any other party agreeing to the contract; and 
  • there is clear evidence of those terms, meaning that it will be easier to prove and enforce the contract (including in court, if necessary).

There are also certain types of arrangements that the law specifically requires to be in writing. For example, an agreement for your insurance, or to buy or sell your house, would have to be in writing. 

Key Takeaways

Different legal documents can convey the promises you or your business make. A deed represents these binding promises through a written and signed document, that is prepared and executed in a specific, legally defined way. A contractual agreement can be written or oral and requires that this promise must be accepted, in exchange for something of value. If there is not an exchange of value, a deed is likely required.

If you need help preparing, reviewing or executing a deed or a contract, or general legal advice, LegalVision’s contract lawyers can help. Call us on 0800 005 570 or complete the form on this page. 

What is a deed?

A deed is a written and signed legal document that contains a binding promise or commitment and is prepared and executed in a specific, legally defined way.

What is an agreement?

An agreement, or a contract, is a written or oral arrangement between two or more parties. Each party possesses an intention to be legally bound in exchange for something of value.

What is the difference between a contract and a deed?

A deed has to be a written and signed document that is prepared and executed in a particular, legally defined way. A contract is also a legally binding agreement but does not have as strict form requirements as a deed. It can be oral or in writing. Also, a contract must have consideration (exchange of value) to be valid. A deed does not require any form of consideration.

Who can witness a deed?

Anyone can witness a deed, as long as they are not a party to it. They must also provide the name of the city or town they live in, and their current job or description.

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