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Deed or agreement – which one should I use?
Updated: 30 October 2022
Sometimes you will have an option to either use a deed or an agreement. For example, where a lawyer has an option to prepare a non disclosure agreement or confidentiality deed for you. Your document can be prepared either as a confidentiality deed or as a confidentiality agreement.
Your choice matters. Enforceability and the way that you sign are two key factors that will influence your decision to pick a deed or agreement.
A lawyer will know the difference but so should you, especially if you are relying on online templates and don't have a lawyer to guide you.
So, if you had the choice, which should you use - deed or agreement ?
Below are some features of a deed and an agreement side by side to help you decide which is best for you and also when you may use each.
In a nutshell
In a nutshell, a deed allows a longer period of time to take legal action if something happens, but there are some rules for how you e-sign. Also, a deed covers you if there is no consideration in a transaction, that is, you don’t have anything of monetary value changing being exchanged between parties.
For an agreement, you can’t get past the easy signature process but the cost you’ll pay is a shorter period to enforce - generally 6 years in Australia. For a more detailed comparison, see our summary table below.
You don't need:
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.
What do deeds and agreements look like?
It'll be pretty clear if you are signing a deed or agreement. Here are the giveaways:
1. the title of the document will either be 'deed' or 'agreement'; and
2. you'll see either 'executed as an agreement' or 'executed as a deed' above the signature blocks at the end of the document.
What if you classify incorrectly?
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 about this, get advice.
So, given that there can be some enforceability concerns with an 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 following the new e-signature rules for deeds if you aren't doing it the traditional way with pen and paper. So, if speed is a factor in getting a document executed, these extra steps could make a deed a hassle for you and you may opt for an agreement.
As always, if you are in doubt, get advice.
I wish you success in your ventures!