WHEN entering into an agreement, parties may choose to have an oral contract, or to enter into a formal written contract. A written contract has the obvious advantage of certainty as to the existence of the agreement as well as the terms of the agreement. If the parties decide to reduce their agreement into writing, they have the further choice of whether to execute it as a simple contract or a deed. However, there are instances where the law does not provide a choice and the agreement must be executed as a deed in order to be enforceable. It is therefore important to be aware of these instances and the differences between a simple contract and a deed, in order to avoid executing an unenforceable contract.

There are several distinctions between a simple contract and a deed. First, deeds require greater formalities in order to be validly executed. The traditional requirements for the execution of a deed are encapsulated in the popular phrase “signed, sealed and delivered”. In other words, the law requires that a deed must be: in writing; signed by the parties; witnessed by at least one person who is not a party to the deed; expressed to be a deed; and be delivered to the other party (which may or may not involve physical release of possession of the document). If any of these formalities is absent then the deed is likely to be deemed invalid. Simple contracts, on the other hand, merely require the signature of the parties. The greater degree of formalities required is, perhaps, the only drawback of executing a deed rather than a contract.

For example, another distinction between the two is that a simple contract requires consideration in order to be enforceable. That is, the parties must exchange some benefit, be it money, goods or services, which is known as “consideration” for the other’s promise. On the other hand, contracts executed as deeds are enforceable whether or not consideration is provided. Additionally, where there is doubt as to whether there is sufficient consideration, the parties may execute as a deed, simply out of an abundance of caution. As a result, one of the most common instances where parties will choose to execute as a deed includes where at least one of the parties is not providing any benefit for the contract. To illustrate, a person who wishes to transfer an item of property to another as a gift may execute a “deed of gift”. Alternatively, they may execute a simple contract and set the consideration as a nominal sum, such as $1, known informally as “peppercorn consideration”. The Sevenoaks Vine Cricket Club in England, for example, currently leases its cricket grounds from the Sevenoaks Town Council at a yearly rent of one peppercorn (£1). This sort of arrangement ensures that a contractual relationship exists, such as that of landlord and tenant, even though only one party is obtaining the benefit of the contract. It also ensures the recognition of contractual rights for the party who is forgoing the consideration.

Another common situation where a document will be executed as a deed, as a precaution against being deemed unenforceable, is where the document seeks to amend a previous contract and the amendments appear to be to the advantage of only one of the parties. This is because if no consideration is given for the amendment, it may not be legally binding unless executed as a deed.

Executing a document as a deed also has the advantage of extending the statutory period of limitation, in most cases. Under our Limitations of Actions Act, an action for breach of contract cannot be brought more than six years after the date on which the cause of action arose. However, for deeds, the limitation period is generally extended to twelve years. Parties may, therefore, choose to execute their agreement as a deed to ensure a greater limitation period for any claims that may arise.

Apart from those instances in which the parties are merely choosing to execute as a deed to take advantage of its benefits, there are other occasions where the law actually requires the agreement to be executed as a deed in order to be enforceable. These include: some agreements dealing with land; some agreements creating powers of attorney; and deed polls; among others. Additionally, the majority of documents usually recorded at the island records office are in the form of deeds, even where there is no strict legal requirement for that particular agreement to be executed as a deed in order to be enforceable.

The next time you are entering into a written agreement, it is worth considering whether to execute it as a deed to take advantage of the several benefits.

René Gayle is an Associate at Myers, Fletcher & Gordon and is a member of the firm’s Commercial Department. René may be contacted via rene.gayle@mfg.com.jm or you can visit the firm’s website at www.myersfletcher.com. This article is for general information purposes only and does not constitute legal advice.