Contracts and deeds are both legal instruments used to establish rights and obligations between parties, but they differ in their formalities, execution, and enforceability.
1. Formation and Formalities
Contracts: Generally, a contract is a legally binding agreement between two or more parties. It requires an offer, acceptance, consideration, an intention to create legal relations, and certainty of terms. Most contracts can be oral or in writing, although certain types of contracts are required by law to be in writing.
Deeds: A deed is a more formal and solemn instrument than a contract. It requires specific formalities, including being in writing, signed, sealed, and delivered. There is no requirement for consideration in a deed, making it enforceable even without the exchange of something of value.
2. Enforceability
Contracts: Generally, a contract is enforceable if it meets the basic requirements of offer, acceptance, consideration, and other necessary elements. Breach of a contract may lead to remedies such as damages or specific performance.
Deeds: Deeds are considered more solemn and are often used for transactions where the parties intend to convey property or create a significant legal obligation. Deeds are considered to have a higher degree of formality and are typically more difficult to challenge compared to contracts.
3. Limitation Period
Contracts: There is a limitation period for bringing a claim for breach of contract, generally six years from the date of the breach.
Deeds: Deeds have a longer limitation period, typically 12 years, or, in some cases, no limitation period at all.
4. Execution
Contracts: Execution of a contract can involve a simple signature by the parties involved.
Deeds: Execution of a deed involves additional formalities such as the use of the word "witnesseth" or a statement of delivery, and in some cases, the affixing of a seal.
5. Types of Transactions
Contracts: Commonly used for a wide range of transactions, both simple and complex.
Deeds: Often used for more significant transactions like property transfers, mortgages, or other transactions where a higher level of formality and solemnity is desired.
While both contracts and deeds are legally binding, the choice between them depends on the nature of the transaction and the specific legal requirements that need to be satisfied. Additionally, legal advice should be sought to ensure compliance with the relevant laws and regulations.