A guide to executing a deed

What is a deed?

A deed is a type of agreement which must strictly comply with the following requirements:

• The agreement must be documented in writing;
• The agreement must explicitly make it clear that it is intended to be a deed – this is known as the “face value requirement”. This may be achieved by specific wording within the agreement such as “this deed is entered into on…” or “executed as a deed”;
• The agreement must comply with the specific execution requirements for deeds; and
• The agreement must be delivered as a deed. It is at the point of delivery that the deed becomes legally binding on the parties to the relevant agreement. Again, this may be addressed by the specific wording used in the agreement such as “delivered as a deed on the date stated at the beginning of this deed”.

Why a deed?

Certain documents, for example powers of attorney, transfers of land and charges over land must be done by way of deed for them to be valid. However, a deed can be beneficial even where there is no statutory requirement. For example, a deed is enforceable in transactions whereby there is no consideration (i.e. monetary or other form of benefit) being received in exchange for the obligations being entered into by a party. This differs from a simple contract which would be unenforceable in the same circumstances.

Additionally, deeds benefit from an extended limitation period (i.e. the time frame by which a party to an agreement must bring a claim for breach of contract) of 12 years from the date of the breach. Simple contracts, on the other hand, have a limitation period of 6 years.

Executing a deed

Execution is the way by which a party to a deed evidences its intention to accept and become formally bound by its terms, although the specific execution requirements may vary based on the entity executing. For example:

• If an individual is signing, they must do so in the presence of a witness who must be physically present at the point of signature; or
• If a company is signing, the agreement may be signed by a director on behalf of the company, in the presence of a witness. Alternatively, the agreement may be signed on behalf of the company by two directors or a director and a secretary.

For overseas entities, legal advice should be sought to ensure that the method of execution is valid and permitted by the laws of the relevant jurisdiction.

Witness requirement

Although there is no statutory requirement for a witness to a deed to be independent (i.e. not related to the signatory), it is best practice. This is because, the purpose of the witness is ultimately to provide unbiased evidence to a court that the party did indeed sign the agreement in the event of dispute. The witness cannot be someone who is also party to the relevant agreement and should be aged eighteen or over.

Can a director witness the signature of another party?

It is generally permissible for a director of a company to witness that company’s signature (Log Book Loans Ltd & Nine Regions Ltd v OFT).

If you have any questions regarding the execution of a deed, please call our Banking & Finance team today on 0113 207 0000.