Deeds and contracts are both legally binding documents, but they serve different purposes and have distinct legal requirements.
What is a Deed?
A deed is a formal, written legal document that creates or confirms an agreement between parties, often involving the transfer of rights, property, or obligations. One of the key features of a deed is that it does not require consideration, meaning one party does not need to provide anything in return for the agreement to be valid. It must also clearly state the intention to be a deed.
Deeds are typically used in more significant transactions, such as property sales or creating a deed of assignment for the transfer of rights. If you want to know what is a deed of assignment, more information can be found online.
What is a Contract?
A contract, unlike a deed, can be either written or verbal and must involve consideration-where both parties exchange something of value. Contracts are used for a wide range of agreements, from employment terms to sales transactions, and are often simpler to create than deeds. Regarding employment, GOV.UK explains the different types of contracts here:
Contracts typically have a statutory limitation period of six years, which is shorter than that of deeds. While they are easier to form, contracts may not always offer the same level of certainty as deeds in situations where no consideration is given or more formal documentation is required.
Key Differences Between a Deed and a Contract
While both deeds and contracts are legally binding, a deed must always be in writing and signed, whereas a contract can be either verbal or written. The most significant difference is that a contract requires consideration, meaning both parties must exchange something of value, whereas a deed does not need this exchange to be valid.
Additionally, deeds have a statutory limitation period of 12 years, compared to the six years applicable to contracts.
Understanding the key differences between deeds and contracts is essential for ensuring that your legal agreements provide the protection you need.
