Deeds: Signed, sealed, delivered

In order for a document to be a deed, it must be “delivered as a deed”. A recent case explains what that actually means. But first a brief explanation of deeds. Despite their slightly old-fashioned name, deeds remain an integral part of legal life in England and Wales, especially for those involved in the construction industry. Making a contract a deed has two advantages.

A deed provides one of the key components - what lawyers call consideration - necessary for a contract. Consideration is normally the exchange of promises at the heart of any contract. For example, an architect promises to design a building and a client promises to pay for it. However, in some contracts - collateral warranties for example - only one party (the person providing the warranty) is giving any consideration (normally a promise that they have performed their services to a certain standard). The beneficiary doesn’t promise anything. A deed gets round this problem and you have a binding contract, although ever-cautious lawyers often draft some notional consideration - the promise to payment of £10 say - in addition to the protection provided by a deed.

The concept of delivery dates back to time well before computers and the internet

Perhaps more importantly, deeds double the time period in which an innocent party can sue for breach of contract: from six years from the date of the breach to 12 years.
So far, so simple. But there’s a problem. Because of the additional benefits parties get from using deeds, there are a few hoops to jump through before a document can actually be one. The requirements are contained in section 1(2) of the rather-dull-sounding Law of Property (Miscellaneous Provisions) Act 1989. You can’t have a deed unless the document (i) makes it clear on its face that it is a deed and (ii) is validly executed as a deed. In a quirk that may seem odd, a deed doesn’t have to be dated, although most are.

Section 1(3) then explains what amounts to valid execution of a deed. In addition to an obligation by the individual to sign the document in the presence of a witness (you need an additional witness if someone else signs on the individual’s behalf), the document must be “delivered as a deed”. Deeds signed by other legal parties must also be “delivered”, although companies benefit from a presumption (albeit rebuttable) that a deed is delivered upon execution.

So, what is delivery of a deed in practice? The concept of delivery dates back to times well before computers and the internet. Two copies of deeds were prepared, each signed by the one of the parties to the transaction. Clerks would then meet up and swap the documents. Each party kept the copy signed by the other as proof of what was agreed.

But just how do you deliver a deed in the 21st century? We owe a debt of gratitude to Judge Seymour QC who, in Bibby Financial Services vs Magson, recently confirmed the answer, relying on a suitably Dickensian decision dating back to 1875 in the process. The signatories to a deed must separately indicate that they intend to be bound by it either through a sequence of actions or an exchange of words that illustrate sufficiently that they are committing to fulfil the obligations contained within it. Neither signature nor handing it over to the other side (both of which happened in Bibby, in a pub of all places, in August 2008) suffice.

The question of whether or not a party did intend to be bound will depend on the facts of the case. In Bibby, the primary issue was whether the alleged deeds were valid and binding; a dispute arising from a difference in the respective accounts of what had been agreed at the meeting in the pub. The defendants submitted that the documents were merely signed in draft to provide comfort for Bibby and that the parties anticipated that typed and final versions would be produced to include their manuscript alterations in due course. As these were never produced, the defendants argued that the documents had not been properly executed or delivered. The judge accepted this, concluding there was no intention for the defendants to be bound by the obligations contained in the documents that they had signed.

One of the odd things about Bibby is that it quite easy to avoid this problem in practice. Most well-drafted deeds contain a clause stating that the document is executed as a deed and was delivered when it was dated (a good reason for dating a deed).

Stuart Pemble is a partner and Laura Taylor is a paralegal at Mills & Reeve