What is the Difference Between an Agreement and a Deed in the UK?

Summary

• A deed is a more formal legal document than an agreement, requiring written form, clear identification as a deed, signature by all relevant parties, and a witness to each signature, whereas agreements can be made verbally or in writing and do not require a witness to be enforceable.
• Unlike agreements, deeds do not require consideration – meaning no payment or exchange of value is necessary for a deed to be legally binding – making them suitable for transactions such as property transfers, powers of attorney, and appointments of trustees.
• The limitation period for bringing a claim under a deed is 12 years, compared to six years for a standard agreement, giving parties significantly longer to seek legal recourse for a breach.
• This article is a guide to the differences between deeds and agreements for business owners entering into commercial transactions in the UK, produced by LegalVision, a commercial law firm.
• LegalVision specialises in advising clients on contract law and commercial document execution.

Tips for Businesses

Identify whether your transaction requires a deed or a standard agreement before drafting any documents, as the signing and witnessing requirements differ significantly. For deeds, ensure a suitable independent witness is present at signing and that their name and address are recorded. Where large asset transfers are involved, consider the longer limitation period a deed provides.

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On this page

• What is an Agreement? 
• What is a Deed? 
• What are the Differences Between an Agreement and a Deed? 
• 1. Written, Verbal and Unilateral Contracts
• 2. Signed, Sealed, Delivered
• 3. Consideration
• 4. Limitation Periods
• Key Takeaways
• Frequently Asked Questions

Deeds and agreements are both legally binding contracts, but they carry different formalities, purposes and legal consequences. A deed is the more formal of the two, carrying stricter signing requirements and a longer limitation period than a standard agreement. This article will explain the differences between deeds and agreements, including how you use and execute them.

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What is an Agreement? 

An agreement is a legal document businesses can use to create a contract for the performance of services. For example, a business can create an agreement with another company for the sale of goods needed for their business operations to run. 

For you to have an agreement, you need to have: 

• an offer and acceptance of that offer to perform conditions laid out in the contract;
• an intention to be legally bound by the terms laid out in the contract; and
• consideration, which in layman’s terms means payment for the performance of services.  

Agreements are standard contracts that you can make verbally or in writing between one or more contracting parties. 

What is a Deed? 

Deeds are slightly more complicated and will usually relate to property ownership or transfer. A deed is a binding promise that involves a commitment to perform a duty. For example, a deed for the transfer of land will rely on one party’s duty to transfer ownership of a plot of land to another.  Deeds can also confer an interest, assignment or right over property or a specific function.  Typically, deeds can transfer ownership of an asset from one owner to another and are commonly seen in property law arrangements. But, you can also use them for transactions involving: 

• transfers of leases and real estate;
• transferring assets or intellectual property;
• mortgages transfers;
• powers of attorney;
• non-disclosure arrangements;
• transfers of shares; or
• appointing trustees.

Types of Deeds

You may come across the following types of deeds when transacting for new businesses: 

• trust deeds; 
• escrow deeds; 
• special warranty deeds; 
• sale deeds; 
• deed poll; and 
• deed of assignment. 

What are the Differences Between an Agreement and a Deed? 

Across the UK, businesses have used deeds for centuries. They usually use deeds to transfer land and treat them as more formal than standard agreements. Here are four key differences between a deed and an agreement:

1. Written, Verbal and Unilateral Contracts

The first important difference between a deed and an agreement is how you make them. For an agreement to be enforceable, you must have an offer, acceptance, consideration, clarity of contract and an intention to create legal relations. That means you do not necessarily need to have a written document to create a legally binding contract. 

Verbal contracts are perfectly enforceable contracts in the eyes of the law, and so are unilateral contracts. You do not need to write these contracts down. You can create them when one party makes an offer and the other accepts it by performing their obligations.

In contrast, you must set out a deed in writing and clearly state that it is a deed, not an agreement. The document must include wording that confirms it is a deed, although it does not need to include the word “deed” on the front page.

2. Signed, Sealed, Delivered

You can only make deeds in writing. However, you must also have all relevant parties sign the deed for it to become enforceable. Certain companies may require that any person signing on behalf of that company affixes a company seal to that document. Historically, people use company seals to demonstrate that a person has the authority to sign a contract on behalf of their company. This is especially important when it comes to signing deeds because of the large transfers of property that a deed can mandate. 

Therefore, when signing a deed, you must have someone else physically present to watch you sign the document. That person must then sign as a witness to your signature, and needs to also give their name and address. By doing so, they can be contactable if needed to authenticate your signature in the future.

Conversely, agreements do not have a ‘delivery’ requirement. Furthermore, unlike a deed, agreements do not always need signatures to become legally enforceable. For instance, if you or another party perform your duties under an arrangement, that can create a legally binding contract. You signature on an agreement does not need a witness. 

3. Consideration

Consideration is a legal term for payment. For you to have a legally binding contract, you need to have payment passing from one party to the next in return for the performance of a service. 

On the other hand, deeds do not require parties to transfer payment between themselves.
In addition, signing the contract usually shows your intention is being legally bound by the terms.

4. Limitation Periods

A limitation period is the period of time in which you can attempt to claim damages for a breach of contract. 

Under an agreement, you can only bring a claim against your business partner within six years of making that contract. Meanwhile, deeds have a much longer limitation period. With a deed, you have 12 years to take action against a breach of the obligations in the agreement. 

Key Takeaways

Deeds and agreements are very important in standard business transactions but are very different documents, with deeds being much more traditional than an agreement.

If you need more advice on drafting, negotiating or signing deeds or agreements, LegalVision provides ongoing legal support for businesses through our fixed-fee legal membership. Our experienced contract lawyers help businesses manage contracts, employment law, disputes, intellectual property, and more, with unlimited access to specialist lawyers for a fixed monthly fee. To learn more about LegalVision’s legal membership, call 0808 196 8584 or visit our membership page.

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