In-deed-y, all-write-y

March 7, 2012 12:24 pm Published by

The benefits of signing a written business agreement may appear to be fairly obvious . Setting out the terms of a transaction in writing offers the clarity, certainty and detail required by all parties involved. However, sometimes a distinction needs to be made between something that is merely an ‘agreement’ and something that constitutes a ‘deed’.

A deed is an agreement which is ‘executed with the necessary formality’. Unlike an ordinary contract, it is enforceable even if no consideration is given for the obligations contained in it. It is also capable of being enforceable for up to 12 years, as opposed to 6 years for an ordinary contract. Certain agreements, such as transfers of land, mortgages and leases are not enforceable unless they are executed as deeds.

It is therefore vital for those involved, especially limited companies and LLPs, to make sure that due formalities are observed. Historically, a signature to a deed required to be sealed with wax, but now it only need to be made clear on the face of the document that it is intended to be a deed, usually by a particular form of wording and, in the case of individuals, independently witnessed.

In the case of corporate entities, the deed will need to be signed by two ‘authorised signatories’ of the company, being two directors or a director and secretary (or, in the case of LLPs, by two designated members ). Since the Company Act 2006, when sole director companies were permitted to be run without the need for company secretaries, the signature of one director duly witnessed, will be sufficient to constitute a deed. Equivalent provisions were granted for LLPs in 2009.
It is often forgotten that a deed only becomes legally binding when it is ‘delivered’, presumed to take place once it has been sent to the other party. If the document is only intended to be enforceable as a deed once a condition has been satisfied or until an appropriate date has been agreed, this should be made clear in the signing clause itself.

 

For more detailed information please contact Andrew Fleming on 01473 230033 or emailarf@blockslegal.co.uk

The above is general comment only and individual advice should be taken

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This post was written by Andrew