One question I am often asked is whether a contract needs to be executed as a deed simply because it will last for several years. The answer depends on more than just the contract length – and it starts with understanding the difference between a deed and a simple contract.

What is a contract?

A contract is a legally binding agreement between two or more parties. For it to be valid, there must be an offer, an acceptance, consideration (something of value being exchanged, usually money or services), and an intention to create legal relations. Most business agreements meet these criteria and can be signed in a straightforward way, whether electronically or in hard copy.

Unlike deeds, a simple contract does not have to be witnessed. The signature block is usually short and signed only by the authorised signatories for each party.

What is a deed?

A deed is a different type of agreement that follows stricter formalities. It is enforceable even if there is no consideration,  which is why deeds are often used for one-sided promises, such as a guarantee or a gift. Deeds must be executed in a specific way: by an individual signing in front of a witness, or by a company either signing with two authorised signatories or by a single director in the presence of a witness.

Another important difference is the time limit for bringing claims. For a simple contract, the limitation period is usually six years from the date of breach. For a deed, it is twelve years.

When the law says a deed is required

There are certain situations where the law requires a deed, regardless of contract length. This includes powers of attorney – for example, in a shareholders’ agreement, the parties might agree that if one of them dies or exits the company, the others have the legal power to sign documents or transfer shares on their behalf. That power must be granted in the form of a deed.

Deeds are also required for transactions involving the transfer of land or certain long leases, the granting of mortgages or charges, and some types of releases and waivers where the releasing party is not receiving any consideration.

In these situations, using a simple contract would not be valid, no matter how carefully it was drafted.

Does contract length make a difference?

The length of a contract on its own does not make it a deed. A ten-year supply agreement can still be a simple contract provided the standard legal requirements are met. However, there can be commercial reasons to opt for a deed for a long-term contract.

If the agreement will run for many years and you want the ability to bring a claim at any point within twelve years rather than six, a deed can be the better option. Some businesses also choose deeds for high-value, long-term arrangements because it removes any doubt about whether there was sufficient consideration to make the contract binding.

Deciding which to use

If you are unsure whether to execute as a deed, it can be worth choosing a deed for the added protection. The extra formality means a little more planning at the signing stage, but you gain the longer limitation period and avoid arguments about consideration.

In summary, deeds are particularly relevant where:

• The law requires them, such as for powers of attorney, certain property transactions, and some security documents.

• The arrangement is one-sided, with no consideration being given in return.

• The parties want the benefit of the twelve-year limitation period.

Examples of execution blocks

Simple contract – company

Signed by [DIRECTOR NAME]                         Signed: ……………………………
FOR AND ON BEHALF OF
[COMPANY NAME]

Deed – company with one director and a witness

Executed as a deed by [Company Name].                         Signed: ……………………………
acting by its Director [NAME]

in the presence of:

Witness signature: ……………………………………….

Name: …………………………………

Address: ……………………………….

Occupation: …………………………….

Need help with contracts?

Choosing whether to execute as a deed or a contract is not just about formality. It affects enforceability, the length of time you have to bring a claim, and in some cases whether the agreement is valid at all. For certain clauses, such as powers of attorney in shareholders’ agreements, a deed is a legal requirement. For others, it can simply be a strategic choice.

If you are entering into a long-term or high-value agreement and are unsure which route to take, it is worth getting advice before signing. The wrong choice might not cause problems now, but it could have serious consequences years down the line.

If you would like me to review your agreement or advise on whether it should be a deed, get in touch. I can make sure your document is executed correctly, with the right protections in place from day one. Contract Law Solicitor.