- The paperwork has arrived, and it says "Deed"
- Two documents, one real question
- Is each side actually giving something?
- How long will the obligations stay enforceable?
- Who has to sign, and how?
- When does each document bind?
- Will a court treat it as a deed at all?
- How an Artificer Legal lawyer helps you make the call
- Does value move both ways, and for how long
The paperwork has arrived, and it says "Deed"
You have agreed the commercial terms, and the paperwork has arrived. The document might be headed "Deed of Guarantee" for the new bank facility, a deed of variation changing an existing supply agreement, or a deed of release settling a dispute that has been running for months. It could just as easily be a plain contract. The choice between the two shapes how enforceable the deal is, who has to sign it, when it binds, and how long the other side has to sue you. The two documents look similar on the page, which is exactly why businesses get the choice wrong.
Two documents, one real question
A contract is an exchange of promises. Each party gives something of value, such as money, goods, services or a promise to do something, and receives something in return. That exchange is called consideration, and without it a contract does not bind. A deed is a formal written promise that binds because of how it is made rather than because of any exchange between the parties. That is why a deed can hold up a promise that runs entirely one way, such as a gift or a guarantee.
The question "deed or contract?" is really two narrower questions. First, does value move both ways? If it does not, a contract cannot hold the deal together, and a deed is the only reliable option. Second, how long do the obligations need to stay enforceable? In New South Wales, a claim on a contract must be started within six years, while a claim on a deed has twelve. If you need the longer window, a deed is the way to get it, provided you accept the formalities that come with it.
Most routine sales and services agreements are contracts, and nothing more is needed. Deeds earn their keep in guarantees, releases, variations and settlements, where one side gives something and the other side gives nothing back. The factors below walk through what to weigh before you choose.
Is each side actually giving something?
Consideration is the price of a promise. For a contract to be enforceable, each party must promise something of value in exchange for the other party's promise. The value does not have to be equal or fair, but it must be real. A promise given for nothing is not enforceable as a contract, and a court will not help a party who promised to give something away for free and later changed their mind.
Where there is no exchange, a deed is the answer. Because a deed binds by its form, it holds up a one-way promise. Common situations where consideration is missing or contestable:
- Guarantee: a guarantor promises to pay someone else's debt and typically receives nothing in return. Guarantees are commonly executed as deeds so there is no argument about what the guarantor received for the promise.
- Release: one party gives up a claim, often in exchange for nothing. A deed of release ends the dispute cleanly without needing to show what was exchanged.
- Variation: changing an existing contract, such as extending a deadline or adding obligations, generally needs fresh consideration to bind. The supplier who promises an extra month's credit to an existing customer has received nothing new, so the promise may not be enforceable. Documenting the change as a deed of variation removes that argument entirely.
- Gift: a promise to give something away, such as shares or equipment, is only enforceable if it is made by deed.
The comparison in short:
- Contract: binds only where both sides exchange something of value.
- Deed: binds even where one side gives nothing in return.
If your deal has value moving both ways, a contract works. If it does not, only a deed will do.
How long will the obligations stay enforceable?
Limitation periods set how long a party has to start a court claim, and they differ between contracts and deeds. In New South Wales, s 14(1)(a) of the Limitation Act 1969 (NSW) gives six years for an action founded on contract, running from when the cause of action accrues, which for a breach of contract is usually the date of the breach. Section 16 of the same Act gives twelve years for an action founded on a deed.
The gap matters most when problems surface late. Imagine you sell your manufacturing business with a warranty that the production line will run for several years. If a latent defect in the machinery only shows up in year seven, a buyer who contracted with you is out of time to sue, while a buyer who took a deed still has five years of the twelve-year window left. That is why sale-of-business warranties are often documented in a deed, and why sellers usually push for a contract so their risk ends sooner:
- Contract: six years in NSW from the date the cause of action accrues. Risk ends sooner, which suits the party providing value.
- Deed: twelve years in NSW. More time to uncover defects, which suits the party receiving the promise.
These periods are not uniform across Australia. In Victoria, for example, s 5(1)(a) of the Limitation of Actions Act 1958 (Vic) gives six years for actions founded on simple contract, and s 5(3) gives fifteen years for an action on a bond or other specialty, which includes a deed. Before relying on a particular period, check the law of the state where a claim would be brought, and take advice if the transaction touches more than one state.
Who has to sign, and how?
A contract can be made in writing, orally or by conduct, and needs nothing more than agreement and consideration. A deed is a creature of form, and the formalities are the price of its advantages.
Under s 38 of the Conveyancing Act 1919 (NSW), a deed must be signed, must be sealed, and must be attested by at least one witness who is not a party to it. No particular form of words is required for the attestation. A physical wax seal is not needed: an instrument that is expressed to be a deed and is signed and attested is deemed to be sealed. The document must also actually say that it is a deed.
For a company, s 127 of the Corporations Act 2001 (Cth) sets the rules. Without a common seal, a company executes a document by having it signed by two directors, or a director and a company secretary, or, for a proprietary company, a sole director who is also the sole secretary or where the company has no secretary. A company executes a document as a deed when the document is expressed to be executed as a deed and is signed in one of those ways. Company execution under that section does not need to be witnessed, and delivery of the deed is not required.
Electronic execution is now routine. In NSW, s 38A of the Conveyancing Act 1919 allows a deed to be created in electronic form and electronically signed and attested, and companies may sign documents electronically under the Corporations Act. The formalities have not disappeared, but they can be managed remotely.
The practical difference:
- Contract: signatures, or even conduct, are enough. The deal is done when the parties agree.
- Deed: the right signatories, an attestation clause and a witness must all line up, and the document must state that it is a deed.
When does each document bind?
A contract binds when an offer is accepted and consideration passes. A deed binds on delivery. At common law, a party who delivers a deed is bound even if the other party has not yet executed it, and delivery is judged by words and conduct rather than by any ceremony. For a company executing under s 127 of the Corporations Act 2001 (Cth), delivery is expressly not necessary.
The timing difference can catch people out. Sending a signed deed across for the other side to sign can amount to delivery and bind you earlier than you expected, even before the other party has signed. With a contract, nothing binds until the parties have actually agreed and consideration has moved. If your deal depends on conditions being satisfied first, a deed can be held in escrow and take effect only once those conditions are met.
Will a court treat it as a deed at all?
Deed treatment is not automatic. A document is a deed only if it is expressed to be one and executed with the formalities. A document that never says the word "deed" will not attract deed treatment no matter how formally it is signed.
The reverse error is more dangerous. A document that was meant to be a deed but was executed sloppily, without the right signatories or proper attestation, can be treated as a contract. If consideration existed, you lose the twelve-year window and are left with six. If it did not, the document may be unenforceable altogether. Whether a document takes effect as a deed or a contract is not something to leave to chance.
How an Artificer Legal lawyer helps you make the call
The deed or contract decision is usually made in the minutes before signing, which is exactly when the factors above are easiest to miss. An Artificer Legal commercial lawyer can help in three concrete ways.
First, they can stress-test whether consideration genuinely exists on both sides of your deal, or whether you are dealing with one of the one-way promises that needs a deed. Second, they can model the limitation risk specific to the transaction: what could go wrong, how long it might take to surface, and whether the longer window a deed provides is worth the extra exposure it creates if you are the party giving the promise. Third, if a deed is the right call, they can draft it so that it is expressed to be a deed, executed by the correct signatories and attested properly, and advise on electronic execution and on requirements that differ between states.
Having the document checked before signing avoids discovering after a breach that it does not do what you thought it did.
Does value move both ways, and for how long
The mistake that costs the most is treating a deed and a contract as interchangeable. A contract signed without consideration is not a contract. A deed executed without the formalities collapses into a contract, and then the consideration problem returns. The decision comes down to two questions: does value move both ways, and how long do the obligations need to stay enforceable?
Most of the time the answer is a contract, and the deal is done with signatures and nothing more. Reach for a deed when value moves one way, or when you need more than six years to discover a problem. If you do use a deed, spend the effort on execution, because a deed that is not expressed to be a deed, or not signed and attested correctly, is a contract in disguise, and a contract without consideration is no contract at all.
The difference between the two documents comes down to consideration, limitation periods and form. Contracts require an exchange of value, bind on agreement, carry a six-year limitation period in NSW and need only signatures. Deeds need no consideration, bind on delivery, carry a twelve-year period in NSW and fifteen in Victoria, and demand formal execution. Weigh those three differences against your transaction and the right document will be clear.