Deed against agreement

Consideration is the whole reason deeds survive

The rule that a promise is only enforceable when something is given for it works fine when two businesses trade money for work. It falls over the moment somebody promises without receiving. A parent guaranteeing a child's lease gets nothing. A departing employee releasing claims after being paid what they were already owed receives nothing new. A company granting an indemnity to a director for past service is promising about the past. In each case a plain agreement is vulnerable to the argument that there was no consideration, and the deed is the answer: it takes its force from the formality of execution rather than from any exchange, so the absence of a benefit stops being a defect. That is the single question worth asking before choosing. Is anything actually moving in both directions.

The formalities, and what they are for

A deed has to be in writing and it has to say on its face that it is executed as a deed, because the parties' intention to take on that form is part of what makes it work. An individual signs and, in most Australian states, that signature is witnessed by somebody who is not a party. Sealing has gone in practice, replaced by the words on the page. A company can execute a document as a deed under the Corporations Act by having two directors, or a director and a secretary, or a sole director of a proprietary company sign it, with the document expressed to be executed as a deed. Delivery is the last element and is usually treated as satisfied when the executed document is handed over or exchanged with the intention of being bound.

The longer limitation period, and why it matters

Time limits are the practical reason many transactions choose the deed even when consideration exists. A claim on a simple contract in most Australian states has to be brought within six years of the breach. A claim on a deed generally has twelve, and fifteen in Victoria and South Australia. For a construction defect, a warranty on equipment with a long life, or an indemnity that may only ever be tested when something goes badly wrong years later, that difference is the difference between a right and a memory. It cuts both ways, so a party giving the promise should notice when a counterparty quietly proposes a deed for a document that could perfectly well have been an agreement.

Electronic execution, which is now the ordinary case

Australian companies can sign and exchange deeds electronically, and the requirement for paper and for a physical seal has gone. The document still has to be expressed as a deed and still has to be executed by the right people. Witnessing for an individual is where the detail lives, since the rules on remote witnessing differ by state and some allow it over a live video link with prescribed wording on the page. The safe pattern for a deed involving an individual is to check the state before sending, because a deed that fails its formalities does not quietly become an agreement. If there was no consideration either, it may bind nobody at all.

Choosing between them without overthinking it

Start with the exchange. If both sides are giving something real, an agreement is simpler, faster to execute and easier for a counterparty to sign without asking a lawyer. If one side is giving nothing, or the something is thin enough to argue about, use a deed. After that, consider exposure over time: a promise whose failure would only surface after six years belongs in a deed regardless of consideration. Everything else is presentation. A deed is not more serious, more enforceable or more impressive than a well drafted agreement, and dressing routine paperwork up as one mostly succeeds in adding a witness to the list of people who have to be in the room.

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