WHAT IS THE DIFFERENCE BETWEEN AN AGREEMENT AND A DEED?

What is a Deed?

A deed is a legal document used for the purpose of binding promises or commitments that an individual or company intend to make. Deeds are often used in situations where an agreement has been reached between parties and is required to be in writing, on paper and sealed and delivered. It is not necessary for consideration to be involved in order for a deed to be binding. Consideration means payment of money in exchange for something.

What is an Agreement?

An agreement is also known as a contract and is often used where an offer and an acceptance of offer has been made between parties. An agreement does not have as strict formal requirements that a Deed has. It is used where consideration is involved and exchanged between parties, in other words payment of money for something in return, either an item or thing or an act.

What is the difference between the two?

The main difference between a deed and an agreement is that there are no requirements for consideration to be involved for a deed to be legally binding. For a promise or commitment to be binding in an agreement, there must have been consideration provided between the parties.

When an agreement has been signed by all parties, it becomes legally binding. Whereas when one party signs a deed, it indicates their intention to be bound by the deed and should then be sealed and delivered to the other parties to be executed.

How do I know whether I should enter into a Deed or an Agreement?

If you are unsure as to whether you should be entering into a deed or an agreement to formalise a promise or commitment made with another party, you should be thinking about whether consideration is involved. There are also other requirements. For example, any transfer in an interest in land must be done by deed.

If you require advice in relation to whether a deed or agreement would be right for you, please contact our office on (03) 9707 1155 or email us at admin2@wslegal.com.au