Posted on March 12, 2024
When entering into an agreement with family members, business partners, fellow shareholders or clients/customers, there are two potential formats:
- An agreement; or
- A deed.
There are legal requirements of both a deed and an agreement, which must be satisfied and it is important that you instruct a lawyer to prepare these documents for you to ensure that they are valid and properly bind the parties.
What is an agreement?
An agreement is often called a contract. There must be offer, acceptance, consideration and intention in order for the parties to enter into an agreement. Common agreements include a contract of sale, loan agreement or service agreement.
What is a deed?
A deed is an agreement between parties that confirms promises and obligations. Usually, one or more parties must perform certain steps or obligations, such as payment of monies or transferring a property by a certain date. Often, when parties are involved in litigation and reach a settlement, the parties will enter into a deed of settlement that outlines the steps that will be taken by one or more parties to resolve the dispute.
Unlike an agreement, a deed can be entered into without consideration (that is, without monies being exchanged).
Limitation periods
Most importantly, the limitation period to enforce an agreement is significantly different to the limitation period to enforce a deed. To enforce an agreement, the parties have 6 years from the date of the cause of action, for instance the breach of contract. Conversely, the parties have 15 years to bring an action under a deed. Notably, these limitation periods apply in Victoria and change depending on the relevant state where the agreement or deed is enforceable.
To ascertain when the limitation period is calculated from, you must carefully review the document to ascertain when the cause of action arose. For instance, if the parties entered into a loan agreement, which is executed as a deed, and the terms of the loan provide that the borrower must make repayment of the loan amount by 30 June 2020, then the Lender has 15 years from the date that the borrower failed to meet their obligations, being 30 June 2020.
This article is intended for general informational purposes only and is not legal advice. If you require assistance with a deed or agreement, we recommend that you obtain legal advice. Our friendly team at Scanlan Carroll are available to assist. Please do not hesitate to contact us.
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