What are the differences between a Deed and an Agreement? People often use the words, contract, agreement, deed without really knowing what it entails. One may want to enter into a contract and yet not know the intricacies of each type and what kind will protect his interest by not exposing or subjecting him to undue or undesired liability.
By the end of this article, you will be equipped with knowledge to make viable decisions as regard the kind of contract you need to make and the appropriate time to do so.
It may interest you to know that both a deed and an agreement are all forms of contract and that the bulk of it’s disparity lies in the enforceability of both and it’s attendants peculiarities flowing from the forms or features ab initio constituting either of them.
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What is a deed?
A deed is a special kind of agreement that is binding upon the party executing it from the beginning (at execution) provided it is executed in accordance with all the solemnities required of a valid deed.
It can also be described as a document which binds the person signing it to carryout obligations undertaken by such party.
It is also a written agreement or document, signed and delivered, by which one person conveys certain articles such as land to another. Examples;
a) a deed of trust which is a deed that transfers the title of property to a trustee as a security
b) a deed of release that releases property from an encumbrance, such as a mortgage.
One substantial requirement of a deed is that it ought to be intended by the party executing it to indicate that he or she really intends to fulfill the agrement between the parties.
Judicially, it has been decided that to determine whether or not a document is a deed or an agreement, the courts must have recourse to whether the person executing the deed intends for the document to be immediately binding on that person.
If answered in the affirmative, the document is most likely to be construed as a deed rather than an agreement.
A deed can perform any of the following functions;
1. Convey legal interest in a property to another
2. Create an obligation that is binding or enforceable
3. Affirm an agreement
For a deed to be binding it must comply with the following requirements;
1. Evidenced in writting
3. Delivered to the other party
Courts have pointed to many matters to construe documents as deeds:
1. Nomencleture employed: If a deed is desirable in the circumstances, it is imperative that the deed instrument clearly describes itself as one to avoid it being construed as an agreement.
The document should use languages commonly associated with deeds excluding those peculiar to an agreement e.g. “‘covenants‘” and ‘”consideration‘”.
Also see: Exceptions to the rule in Adams and Lindsell
2. Intention to be bound upon delivery should be inferrable from the surrounding circumstances
3. Conditions for delivery are expressly stipulated in the document
4. Content: That the document includes the phrase ‘by executing this deed’ at the execution panel.
For more interesting information of what a deed actually means in the law of contract, kindly watch the video from YouTube below. Trust me, you will learn by just watching!
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What is an agreement?
Agreement, on the other hand, can be described as a mutual understanding between two parties to do or omit to do an act. It has also been severally described as a meeting of the minds.
Again, an agreement is a mutual consent to either do an act or make an omission. For agreements not properly executed by the parties, nothing compels the parties to adhere to the terms of the agreement aside from honour.
As a general rule, any agreement which lacks consideration is not legally enforceable in the court because it is deficient in form.This position is true even though an agreement is often the beginning of negotiation in a contract.
1. Jane agrees to plough a field for John for a price.
2. A agrees to tutor B daily for the sum of twenty thousand naira.
Another practical example of an agreement is where Mr. A agrees to supply ten cartons of Indomie noodles to Mr. B for a price. Failure by any of the parties to perform their side of the agreement would make the other party want compensation.
But where there’s no consideration of which in this case might be deposit of a particular sum agreed upon by both parties to signify willingness to enter into such contract, and A fails to supply the goods, Mr. B will not be able to claim damages unless he can convince the court that he and Mr. A has had previous dealings in like manner to the satisfaction of both parties and that A’s negligence or wrongful refusal to deliver in this instance has made him, Mr. B to suffer loss by incurring unnecessary expenses or loss of clients.
Types of Agreement
1. Non- disclosure agreement: This is an agreement to treat specific information as confidential.
For instance in a firm that produces a common commodity that is also competitive say a company that produces detergent, it is common for the employers to request for the initiation of a non-disclosure agreement in order to protect their trade secret.
2. Memorandum of understanding: MUO also termed Memorandum of Agreement is mostly used as a confirmation of agreed terms made orally which is now reduced to writting.
An MOU stipulates the principles that ought to guide parties in such contractual relationships.
The application of such contract depends on the circumstances and peculiarities of that contract as such it might be funded or unfunded.
3. Grant: Grant is an agreement to give something to someone or heed a request. It could take either of these forms:
a) Fund given by governmental or non-governmental organizations to individuals for a particular purpose e.g money given to Farmers for Agricultural purposes.
b) A legal conveyance of property for instance, a donation of land by the government to a state or institution.
4. Co-operative agreement: This involves an agreement usually between a sponsor and an institution.
As the name implies, there’s collaboration between the sponsor and the institution.The sponsor follows the agreement through to the end taking an active part whilst playing a supervisory role to see that the desired result is achieved.
5. Material Transfer Agreement: This type of agreement is common in research programmes. Material Transfer Agreement documents what proprietary information, materials or equipment will be instrumental for the research project.
It also outlines when such material is to be transferred and the manner in which such material ought to be transferred back to the source if need be.
It may also be included as a clause in bigger non-disclosure agreements.
Also see: Differences between ratio decidendi and obiter dictum
Major Differences a Deed and an Agreement
1. One major difference between an agreement and a deed is that while the former requires consideration (i.e the payment or reward essential to the formation of a contract which persuades a person to enter the contract) in order for it to be binding but the latter does not because of the idea that a deed is the most solemn indication to the community that the parties to a deed intend to be bound.
2. Another important difference between a deed and an agreement is that a deed is binding on a party when it is executed in line with all the solemnities that is, having been signed, sealed and delivered to the other parties, this is so despite the fact that the other party(ies) have not yet executed the deed document.
3. Furthermore, while an agreement can be done orally or evidenced in writing, a deed must be executed in writing.
4. Another area of disparity is time stipulation or limitation period.
For a breach of contract, the limitation period is usually 6 years after the breach. When it comes to deeds, owing to their unique nature, a limitation period of 12 years is often common.
5. More so, a deed is used when substantial interests are at stake for instance where a person passes an interest, right or property, or creates an obligation binding on a person as opposed to agreement which are used for matters of lesser significance.
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Some states require that certain transactions must be executed by a deed in order to obtain validity. It is quite essential for you to know what form of contract is required at every point to avoid making grave mistakes or omissions that are detrimental to your interest and if confused, it is advisable to seek legal advice.
Edeh Samuel Chukwuemeka ACMC, is a Law Student and a Certified Mediator/Conciliator in Nigeria. He is also a Developer with knowledge in HTML, CSS, JS, PHP and React Native. Samuel is bent on changing the legal profession by building Web and Mobile Apps that will make legal research a lot easier.