In the realm of legal transactions in Australia, deeds hold a special place. They are solemn instruments that go beyond the simplicity of ordinary contracts, requiring specific formalities to ensure their validity and enforceability. Whether you’re entering into a property transaction, a financial arrangement, or any other agreement, understanding how to correctly execute a deed is crucial.
Understanding Deeds
A deed is a written document that provides evidence of an agreement between parties. Unlike contracts, deeds are typically enforceable without the need for consideration (a benefit passing between parties). Therefore, they are usually easier to enforce as one does not need to prove elements of a contract. However, they are generally more technical than contracts. They are commonly used for transferring property, establishing trusts, or granting legal rights that require a higher degree of formality.
Key Elements of a Deed
For a document to be considered a deed, it must include the following elements:
- Intention to Create Legal Relations: Parties must clearly intend for the document to be legally binding.
- Clear Statement: The document should explicitly state that it is intended to be a deed.
- Signature: It must be signed by the parties involved, usually in the presence of witnesses for individuals.
- Delivery: There must be an intention to deliver the document as a deed. Deliver means that a party to a deed intends to be bound by it.
- Seal (optional): Historically, deeds required a wax seal, but in modern practice, a wafer seal or no seal at all may suffice depending on the jurisdiction.
Execution Requirements Across Australia
While the basic principles of executing a deed remain consistent, specific requirements can vary across Australian jurisdictions. Here’s a general guide:
- The deed must be signed by the executing party or parties.
- If the deed is signed by an individual, the signature must be witnessed by at least one independent adult who is not a party to the deed, except in Victoria and Queensland where a witness is not required.
- If the deed is signed by an Australian company, it should be signed in accordance with the provisions for the execution of documents under the Corporations Act 2001 (Cth).
- In NSW, VIC and Queensland, a deed can also be created in electronic form, as well as signed and witnessed electronically. However, this is not allowed in the other parts of Australia.
- Corporations Act 2001 (Cth) was also recently amended to allow electronic execution of deeds, under certain conditions (i.e. s.110A(2)(b)(i)).
Common Pitfalls
Ensuring the correct execution of a deed is crucial to its validity. Common pitfalls include:
- Insufficient Witnesses: Failing to have the required number of witnesses or witnesses who do not meet the criteria can invalidate the deed.
- Lack of Intention: Not clearly stating the intention for the document to be a deed can lead to disputes over its legal effect.
- Failure to Deliver: A deed must be delivered to the other party to be effective.
- Failure to execute it properly: Not signing it properly may make a deed invalid.
- Failure to date the deed – not having a date may not necessarily invalidate the deed, but it may be difficult to prove when the deed was in force.
- Failure to keep original deed – a deed may be deemed lost if there is no original deed, in which case a party may need to make an application to a court to validate it. It is prudent to print a hard copy of the deed even if it is in an electronic form as soon as possible. This may satisfy the requirement that there must be an original, hard copy of the deed.
Avoiding problems with deeds
A deed is usually governed by the laws of State or Territory in which it was executed. Even though many deeds have a clause which specifies which jurisdiction apply, this does not guarantee that a dispute will not be heard in another jurisdiction. A good example of this is Booth v Cantor Management Services Pty Ltd (unreported), where the Supreme Court of South Australia heard a matter in relation to a deed which had been executed in Queensland. Therefore, when drafting deeds, it would be prudent to prepare them in a way to satisfy all jurisdictions, namely:
- Deed should include phrases that it is ‘executed as a deed’ and ‘signed, sealed and delivered’, which should be inserted just above where parties need to sign the document.
- Ensure that each signature by an individual has been witnessed by an adult independent witness.
- Print the whole deed before signing it not just the signing page. Send the whole deed (including its counterparts) electronically too.
- Avoid electronic executions of deeds.
- Keep the complete original deed or at least immediately print the electronic version of it.
- Ensure the deed is dated.
Conclusion
Mastering the art of executing deeds in Australia involves attention to detail and adherence to jurisdictional requirements. By understanding the essential elements and specific formalities required in each state and territory, individuals and businesses can ensure their deeds are enforceable and legally binding. Whether you’re dealing with property transfers, trust formations, or other significant agreements, getting the execution right from the outset is key to avoiding legal complications down the line.
Always seek legal advice when in doubt to navigate the complexities of deed execution with confidence. Please do not hesitate to reach out to MDL for assistance on 07 3370 5100.
