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Deeds, Agreements & Contracts - FAQ's 101

28 October 2016

Why are some documents “Deeds”, some “Agreements” and some “Contracts”?

You may wonder why some legal documents are “Deeds”, some are called “Contracts” and others are called “Agreements” when they seem to deal with the same subject matter. Sometimes deeds are used because they are legally required for the particular situation. Sometimes deeds are used because it is traditional to do so for that situation. Deeds are also used because they have certain advantages over documents that are stated to be “agreements” or “contracts”. A “contract” is another name for a legally enforceable “agreement”.

What are the legal requirements for a Deed?

The legal requirements for Deeds are set out section 9 of the Property Law Act 2007. In summary, a Deed must be in writing, it must be signed by the party being bound by it, the signing party’s signature must be witnessed and the Deed must be delivered to the other party. This means that the Deed could be enforceable against one party even if the other party had not signed it.

If I make a promise to someone, can that person legally enforce my promise?

In simple terms, a person can only legally require you to fulfil your promise (whether it is made verbally or in writing) if he or she is giving something in return, or the promise is recorded in a Deed.

One of the requirements for a contract to be legally enforceable is that payment (or value) must be given by one party in return for a promise given by the other party. Alternatively, there may be an exchange of value. This payment or value is called “consideration”. For example, “I will lease you my farm (promise) and you will pay me $20,000 (payment)”, or “I will let you use my tractor and you will let me use your feed out wagon” (an exchange of promises).

Does a contract have to be in writing?

A contract does not necessarily have to be in writing to be legally enforceable, but in many cases it is desirable to record the terms of the contract in writing so it is clear to both parties what is being agreed. In addition, certain statutes require certain types of contracts to be in writing and meet certain formalities. Contracts relating to the sale and leasing of land and contracts of guarantee must be in writing and meet the requirements of Property Law Act. An agreement recording a couple’s ownership or division of their relationship property must be in writing and meet the other formalities of the Property (Relationships) Act 1976 (such as independent legal advice for each party). Credit contracts, door-to-door sales, contracts to purchase cars from registered dealers and contracts for building work over $30,000 must all be in writing.

What are some of the advantages of recording promises in a Deed?

Unlike a contract, a promise in a Deed is enforceable whether or not there is any payment or consideration given for it. For a legal claim based on a Deed, there may also be a longer period of time within which the claim must be filed in court than that allowed for a contract. Because there is no value or consideration given for a gift, a promise to give something is normally recorded in a deed.

It all depends…

Despite the general rules outlined in the answers to these questions, the answer to a particular problem might depend on the particular facts. Like most legal rules, there will always be exceptions. If you want a question about a particular Deed, contract or Agreement answered properly then it is advisable to take legal advice.

 

Please email me at barbara.mcdermott@nwm.co.nz with your ideas for future articles. Keep an eye out for next month's column, where I will discuss another relevant rural legal issue.


Barbara McDermott is a partner of Norris Ward McKinnon, specialising in commercial and rural law. With offices in Hamilton and Huntly, we have friendly, expert legal advisors ready to help you with your business and personal legal matters.

Barbara McDermott