M&A Vocabulary – For Experts: Understanding “Deed” in Common Law

When contracts are governed by the law of England & Wales, they can be concluded informally (“under the hand”), in writing, or as a so-called Deed. Therefore, not all written contracts are automatically considered Deeds. A Deed is a written instrument that is executed with the required form and by which a right is disposed of. This term from English contract law could therefore also be described as a qualified written form with special legal consequences.

Every Deed must first comply with the written form requirement. However, it is not necessarily required that both parties sign the same document; signatures on several identical copies are also possible (so-called counterparts). It may also be sufficient to merely exchange the signature page. The further formal requirements for a Deed depend on the individual case. A natural person must generally sign in the presence and with the attestation of a witness. For a Limited company under British law, generally either one director and a witness or two directors must sign, unless – less commonly in practice – recourse is made to the possibility of a special company seal. For companies domiciled outside Great Britain, the respective law of incorporation must be considered; in the case of a German GmbH, for example, a sole managing director authorized to represent the company may also sign a contract as a Deed. If a witness is necessary, according to the law, this can be any natural person who is not a party to the contract. However, it is good practice for the witness to have at least a certain degree of independence and to be of legal age.

Furthermore, a Deed must be “delivered.” This is the case when the clear intention of the parties to be bound by the Deed is evident, without necessarily requiring a physical handover. It must also be unequivocally expressed that the document is intended to have the effects of a Deed (“face value”). In practice, standard phrases such as “executed as a deed” are used for this purpose. If a Deed is not intended to become effective immediately, further structuring options are available. For example, one speaks of an “Escrow” when a Deed is irrevocable but is still subject to a condition precedent. Alternatively, delivery can also be delayed, for example, by instructing an agent, especially a lawyer, to deliver the already signed Deed at a later date.

In certain cases, execution as a Deed is legally required. These include, for example, the transfer of real estate, certain leases, the provision of certain securities (Mortgages, Charges), the appointment of a trustee, or powers of attorney. For some types of contracts, only the written form is required, without having to comply with the special form of a Deed, for example, for certain transfers of rights or personal guarantees. If the prescribed form is not observed, a contract may not become legally effective.

However, execution as a Deed is not only a prerequisite for validity in certain cases but also entails special legal consequences. This includes, in particular, that claims arising from a Deed can be enforced even without the provision of consideration. Furthermore, the statutory limitation period generally doubles from six to twelve years. It can therefore also be expedient to optionally execute a contract as a Deed.

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