Simple Contracts and Deeds: A Guide for Clients

Understanding different kinds of agreements and how they work helps businesses avoid problems and ensures that things are done correctly.

Two commonly used agreements are simple contracts and deeds. Here we explain what they are and how they are executed.
 

Simple Contracts

Essentially, a simple contract is an agreement made between parties, such as when one business agrees to provide goods or services to another for a fee. For a simple contract to be legally binding it must meet the following requirements:

• Offer and acceptance: A clear proposal must be made by one party and accepted by the other.
• Intention to be legally bound: Both parties must intend for the contract to be legally enforceable.
• Consideration: There must be an exchange of value between the parties. This can be a financial payment or something else of value, for example, an exchange of one product or service for another.

Simple contracts can be made either orally or in writing, and do not need to meet any formal requirements, such as signing or witnessing. However, while oral contracts are legally valid, we advise clients to formalise their agreements in writing to avoid uncertainties and disputes.
 

Deeds

Like simple contracts, deeds are also a commitment by a party (or parties) to do something. However, they are generally used for more important transactions, such as property transfers or establishing trusts. For this reason, deeds are more formal and require the following:

• Written document: A deed must be executed in writing and clearly indicate that it is a deed.
• Signature and witnessing: The parties making the deed are required to sign it and it must be witnessed by an independent third party.
• Delivery: The deed becomes effective once the party executing it has expressed their intention to be bound by it.

It is important to note here that in the legal context ‘delivery’ does not mean the physical delivery of the signed document, rather, delivery occurs when a party makes clear its intention to be bound by the deed.

The advantage of deeds is that their formality provides a higher degree of certainty and enforceability, making them more suitable for transactions that need to be secure.
 

Executing a Simple Contract or Deed

Execution is the process of agreeing to the terms of the contract or deed. There are different procedures for how individuals and companies execute these agreements. These are discussed below.
 

Execution for individuals

For simple contracts between individuals, execution happens either when the parties orally agree to be bound by the terms of their agreement or when a written contract is signed. It is possible with a simple contract to have a written contract drawn up and executed verbally rather than being signed. However, if there is a dispute, it is much better for both parties to have a signed document.

The process for individuals to execute a deed is straightforward. The deed must be signed by the individual and this must happen in the presence of a witness to confirm the execution is authentic. In cases where the individual is unable to sign themselves, e.g., if they are ill or have a disability, they can instruct someone else to sign. However, in these circumstances, two witnesses are required.
 

Execution for Companies

Under the Companies Act 2006, the execution process for companies involves additional considerations. Simple contracts can be executed either under the company's common seal or by an individual acting with the authority of the company, usually a director. The company seal can also be used for executing a deed. However, if the company wishes to sign the deed instead, then two authorised signatories are required, either directors or the company secretary. Alternatively, the deed can be signed by a director provided there is an independent witness.
 

Witnessing

Witnessing the execution of contracts and deeds is more than a formality, it requires someone physically present to witness the signing and then countersign the document to verify the signatures have been witnessed.

In the case of deeds, individuals who are party to a deed are not allowed to act as witnesses, and to avoid claims that a deed has not been correctly executed, witnesses shouldn't be family members or under 18 – though this is not a legal requirement. In some instances, deeds may need to be acknowledged by a notary public. 
 

Why This Matters for Your Business

Understanding how simple contracts and deeds work helps businesses make informed decisions, reduce risk and comply with legal obligations. As a result, companies can better protect their interests and have confidence in their commercial relationships.

Find out more about our Company and Commercial Law services.