An overview of the law and practice relating to the formalities for execution of contracts and deeds governed by the laws of England and Wales.
A formality is a procedure or requirement that must be followed to give legal effect to a particular agreement or transaction. Examples include a requirement for a contract to be made in writing or for it to be signed.
English law favours flexibility over form and there is no general rule under English law that requires all contracts to be made in writing or to be signed by the parties. In many cases, a contract can be made informally (including orally or by conduct) and without a written document being produced or signed, provided it contains the necessary ingredients to make it a legally enforceable agreement.
Should a dispute arise, Judges will look at the intention of the parties to give effect to the terms of an agreement, but there are some contracts that are subject to statute imposed formality requirements in order for them to be valid and binding at law.
Simple Contracts or Deed
Specifically there is a distinction made between deeds and simple contracts.
When an agreement is made wholly in writing (either to satisfy a legal requirement or through parties’ choice), it can take one of two forms:
- A simple contract.
- A formal legal document known as a deed, which must comply with more onerous formalities (including particular execution requirements) to have legal effect.
The Law Commission has defined a deed as a written instrument which is executed with the necessary formality, and by which an interest, right, or property passes or is confirmed, or an obligation binding on some person is created or confirmed (see Law Commission consultation paper No. 143: The execution of deeds and documents on behalf of bodies corporate, November 1996: paragraph 2.6: Part II (1996 Consultation Paper)).
A principal difference between a deed and other written contracts is therefore that additional formalities beyond a simple signature are required for the instrument to be enforceable.
The Law Commission has identified three main purposes of the formalities for making a deed:
– Providing evidence that the maker entered into the transaction.
– Trying to ensure that the maker does not enter into the transaction without realising what they are doing.
– Making it apparent to third parties what kind of document it is, and what its effect is to be.
(Paragraph 2.18, Part II, 1996 Consultation Paper and paragraph 2.4 of Law Commission consultation paper No. 237: Electronic execution of documents, August 2018.)
A simple contract
A simple contract does not usually need to satisfy any formality requirements to be enforceable.
A simple contract generally can be written, oral or a combination of both.
Where a simple contract is reduced to writing and signed by the parties, it is commonly referred to as being signed under hand. When signing a simple contract under hand, all that is typically required is for the signatory to apply their usual signature to the contract in the space appointed for doing so. There is no requirement under English law for a person to witness the signature of a simple contract, unlike with a deed.
Effect of a deed
Aside from the additional formalities that apply to deeds, a deed has certain effects in law that distinguish it from a simple contract. In particular:
- No requirement for consideration. Deeds are generally enforceable despite a lack of consideration. Although it may impact the remedies available for breaches. The courts will not, however, usually order specific performance of a voluntary undertaking (as opposed to awarding damages for breach) even if it is made by deed, on the basis that equity does not assist a volunteer.
- A deed has a longer limitation period; 12 years instead of 6 with a usual simple contract as per section 5 Limitation Act 1980. However, the limitation period is generally 12 years in the case of a deed (subject to certain exceptions set out in statute.
- Estoppel by deed. While estoppel can arise in a number of contexts, a stronger common rule has developed in relation to deed, by which a party is estopped, as against the other parties to the deed and their successors in title, from disputing the validity or effectiveness of the grant, including statements of fact made in either the recitals or the operative parts of the deed.
English law mandates the use of a deed in certain transactions or circumstances.
What is a deed?
Formalities for creating a valid deed
There are four key requirements for a valid deed:
- A deed must be in writing. This is a common law requirement modified by section 1(1)(a) of the LP(MP)A 1989, which abolished any rule of law restricting the substances on which a deed may be written.
- Face value requirement. It must be clear from the face of the instrument that it is intended to take effect as a deed (section 1(2)(a), LP(MP)A 1989).
- The instrument must be validly executed as a deed by the person making it or, as the case may be, by one or more of the parties to it (section 1(2)(b), LP(MP)A 1989).
- A deed must be delivered. Although this was historically a common law requirement, the rule has been modified by statute (for example, section 1(1)(c), LP(MP)A 1989 and section 46(2), CA 2006).
Delivery of deeds
The final formality necessary for a valid deed is the statutory and common law requirement of delivery. You can have a deed that is executed but not delivered.
The purpose of delivery is to signify that the maker of the deed intends it to become effective and that it binds them. A deed becomes binding on the date of delivery, not from the date of its execution (Universal Permanent Building Society v Cooke  Ch 95, at 101).
Delivery of a deed can be conditional or unconditional. When a deed is delivered unconditionally, it takes effect immediately and is irrevocable in the absence of an express right of revocation. This may have important consequences for the timing of subsequent acts.
Historically, delivery consisted of the physical act of handing the deed to the other party, but over time, the transfer of physical possession has become less important.