Deed or agreement – which one should I use?

By Vivian Michael | Startup Contracts

Which should I use - deed or agreement?

Photo by Jens Lelie on Unsplash

I’ve previously shared with you some useful tips about deeds and agreements.

Sometimes you will have an option about whether to use a deed or an agreement. 

For example, where a lawyer has an option to prepare a non disclosure agreement or confidentiality deed.   

A lawyer will know the difference but so should you, especially if you are relying on online templates.

So if you had the choice, which should  you use - deed or agreement ?

Here are some features of a deed and an agreement side by side to help you decide which is best for you. 

Agreement

Deed

You need: 

  • offer, acceptance and consideration (something of value) changing hands

You need: 

  • to use pen and sign on paper
  • You need a witness in the state of Victoria (so for best practice, include a witness signature block)
  • Witness needs to be over 18 and not a party to the deed.
  • use "signed, sealed and delivered" above the signature block 

You don't need: 

  • to use pen, you can e-sign 
  • A witness - they are optional

You don't need:

  • Consideration. You don't need any money to change hands to use a deed. 

Advantages: 

  • easy to e-sign
  • no witness needed

Advantages:

  • you don't need consideration (money to change hands)
  • you have a longer time period to enforce a deed - 12 years in all states except SA and VIC which allow 15 years

Disadvantages:

  • You have 6 years to enforce an agreement
  • can't use them for initial discussions when money has not changed hands.

Disadvantages: 

  • Pen and paper are needed, no e-signatures allowed

Examples of when to use a deed and when to use an agreement

Below are the features that may impact your decision to select either an agreement or deed in a particular situation.

Agreement

Deed

Consideration 

  • there's offer, acceptance and consideration
  • You are giving the agreement to someone that you will pay or someone that will pay you e.g. employee, supplier, consultant


No consideration 

  • there's no consideration (no money changing hands) e.g. prospective collaborator, business partner.  
  • You are still investigating if the party will be a good fit so money has not changed hands yet. e.g. discussing a confidential business idea.


E-signing important

  • If e-signatures are important, use the agreement, otherwise if not, use a deed because you'll have a longer enforcement period.

E-signing is not important

  • If you don't have any trouble getting pen signatures on paper, you can use the deed.

Enforcement: 

  • not a substantial investment, you can accept a 6 year enforcement period 

Enforcement

  • There's a substantial investment involved and you need a longer time period to enforce your agreement - the deed allows you 12 years in all states except SA and VIC which allow 15 years

Disadvantages:

  • You have 6 years to enforce an agreement
  • can't use them for initial discussions when money has not changed hands.

Disadvantages: 

  • Pen and paper are needed, no e-signatures allowed and this is ok with you.

What if you get it wrong ?

If you use an agreement and there was no consideration (no money changing hands) then the agreement may not be enforceable.

But, before you panic, get advice. 

So given that there can be some enforceability concerns with the agreement. What's safer?

The safer option  

In this way, deeds are a safer option - you don't need to worry about a lack of consideration e.g. discussing a business idea without money changing hands because the deed covers you regardless. 

But... as discussed above, you'll need to sign a deed with pen and paper and if you are in Victoria, you'll need a witness.

So, if speed is a factor in getting a document executed, these extra steps could make a deed a hassle for you. 

As always, if you are in doubt, get advice! I wish you every success for your venture! 


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About the Author

Vivian Michael is a lawyer and founder of Michael Law Group. Vivian's mission is to make quality business legal services accessible to entrepreneurs launching in Australia that would otherwise DIY, rely on legacy contracts or go without.

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