What is the difference between Contracts, Deeds and Agreements

10 April 2022 in Building and Construction Law, Civil and Commercial Litigation and Law, Commercial Lawyers, Contract Lawyers

An agreement is a colloquial term that can be documented in the form of a contract or deed.  Deeds and contracts differ in several ways discussed in this article.  In addition, somewhat confusingly the term agreement is sometimes used to describe a contract or a deed.

Definition of a Deed

A deed is a binding promise or commitment to do something.  Through the execution of a deed, a promise or commitment can be made legally enforceable.

Examples of deeds include:

1. Deed of indemnity
2. Deed of confidentiality
3. Deed of termination
4. Deed of settlement and release

Defining characteristics of Deeds.

1. Deeds have a 12 year limitation period, which means they can be relied upon for 12 years and the time frame for which a claim may be brought to the court is 12 years.
2. For a deed to be executed it must be in writing, signed and witnessed and contain explicit language that indicates that it is intended to be a deed.  For example, it may say “by executing this deed” or “executed as a deed”.
3. Deeds are required to be sealed and delivered to the other party or the phrase “signed, sealed and delivered” written in the document for it to be deemed valid and enforceable.  The reference to sealed reflects the fact that historically a deed had a physical seal placed on the document.
4. A deed does not require consideration to be enforceable.  Consideration is the value which is received in exchange for the performance of the promise from one party to the other for goods or services.  For this reason deeds are often used to make promises legally binding.  It is important to note that deeds can include consideration but in the absence of consideration a deed must be used rather than a contract. If a deed does include consideration, this will be written in the document.

Defining characteristics of Contracts

1. Contracts have a 6 year limitation period, which means that the time frame for which a claim may be brought to the court is 6 years.
2. Contracts require consideration to be enforceable.  The consideration must be deemed sufficient for the contract to be valid and enforceable.  It is required that there is a price and this price be given in exchange for that promise.  The price is not required to be monetary or even of monetary value.  It is not required that any tangible benefit is received and may even just involve the giving up of a freedom which is otherwise enjoyed, placing a detriment on the part of the promisee.  The detriment suffered or a benefit enjoyed is the price for the promise.  There is no requirement for the consideration to be of a comparable value to the promise which it is being provided for.  However, it must have value in the eyes of the law.  It is generally required that the consideration comes into existence at the same time or after the promise.
3. For both deeds and contracts, it is necessary that there is an offer, an acceptance of that offer and an intention to create legal relations.  One element that is essential only in a contract is the requirement for consideration.  Consideration is the value which is received in exchange for the performance of the promise, for example, the provision of goods or services.

Examples of Contracts

1. Contract for the sale of property
2. Contract for the sale of business
3. Home building contract
4. Employment contract

The term agreement sometimes causes confusion to the layperson because agreement can refer to a deed or contract.  Once the parties have reached an agreement, that agreement can be documented in the form of a contract or deed. Examples of where the term agreement is commonly used and the document is a contract are;

1. Shareholders agreement
2. Supply agreement
3. Franchise agreement
4. Export agreement

Examples of deeds that are sometimes referred to as agreements are;

1. Settlement agreement
2. Intellectual property licence agreement

There can also be documents that are referred to as agreements which could be in the form of a deed or contract.  The drafting of the document will make it clear whether it is a deed or contract.  Examples of this are;

1. Confidentiality agreement
2. Non-disclosure agreement
3. An agreement of novation

What happens if a party breaches a deed or contract?

There are various remedies if a deed or contract is breached.  The business and commercial lawyers at Brander Smith McKnight can advise you on the best course of action if a deed or contract has been breached.  We will fight for your rights.  Potential actions when a deed or contract is breached include:

Monetary Damages

A sum of money paid to a party as a result of the breach by the other party.  These include;

1. Compensatory damages are intended to place the party in the same situation they would have been in had the deed or contract not been breached, to the extent that money can achieve this.  Any awards of damages cannot place the party in a better position than they would have been in had the deed or contract been properly performed.  The party which is claiming for the damages must prove that they have suffered an actual loss or damage as a result of the breach in the deed or contract.
2. Nominal damages may apply when the breach did not cause any actual loss or damage.  They act as an acknowledgement of the infringement of a parties legal rights, but as there has not been any actual loss or damage established, the sum of the money payable is likely to be very small.
3. Expectation damages may apply when the breach of a deed or contract causes the loss of what a party could have anticipated if the contract had been fulfilled.  The damages act to place the wronged party in the position that they would have been in had the breach not occurred.
4. Liquidated damages apply when the damages for the breach of a deed or contract are pre-agreed by the parties of the contract.  This means that the court is only required to determine if the breach has occurred.  However, if the liquidated damages clause is deemed to be a penalty damage, the court will see it as invalid.

Restitution

A party is able to recover a sum of money from another through restitution when the money has been paid incorrectly or the party has been otherwise unjustly enriched at the expense of another party

Rescission

This allows a party to the contract to cancel the deed or contract.  This is mostly applicable when the wronged party has been a victim of factors such as influence or duress.

Rectification

This allows the parties original intentions to be reflected by the deed or contract through the rewriting of the contract.

Specific Performance

The court may enforce the terms of a contract if a breach either actual or anticipated has occured by making an order for specific performance.  This is an order requiring the party to perform the contract.  It is only made in limited circumstances where the court determines that damages would not be a sufficient remedy.  For example, where the subject of the contract is unique such as land or a painting.  Specific performance is only available where consideration has been included in the agreement.  In other words, it mostly applies to contracts.  However, it can apply to deeds which specifically include consideration.

Brander Smith McKnight Lawyers

The business and commercial law lawyers at Brander Smith McKnight have over 40 combined years of experience in all aspects of deed and contract drafting, review and negotiation with the other party.  We pride ourselves on meticulous drafting of documents that can significantly reduce future disputes.  We can explain in plain terms the sometimes difficult legal terms and effectively advocate for you if a deed or contract is breached.

We are conveniently located in Sutherland, Parramatta, Wollongong and Sydney CBD.