Is the Deed ‘done’?
12 February 2024
Deeds are often the contract of choice for the construction industry, having the effect of extending the liability period to 12 years, as well as ensuring enforceability where no consideration is given.
In English law, contracts can generally be reasonably flexible and other than in certain circumstances (e.g. contracts for the sale of land or assignment of the benefit of a contract), don’t have to be signed or in writing (not that we would of course recommend that approach). However, there is no flexibility when it comes to creating a valid deed. As a reminder, to be valid, a deed needs to be:
- in writing;
- state that it is a deed (the ‘face value’ requirement);
- validly executed as a deed; and
- delivered (this can be summarised as a clear indication to be bound and is not usually only countered if there is evidence a party did not intend delivery to take place).
The question of whether a deed had been validly executed as such was recently considered in the case of Lendlease Construction (Europe) Ltd v Aecom Limited (High Court) – 1 November 2023. This case considered, amongst many other issues, whether a deed signed in 2004 had been adequately executed as a deed. As it was signed pre the 2006 Companies Act, the rules on execution were covered by sections 36A and 36AA of the Companies Act 1985 and section 1 of the Law of Property (Miscellaneous Provisions) Act 1989, which provided that:
- valid execution is necessary for a deed to take effect;
- for a company to perfect execution as a deed it had to be sealed in the presence of two directors or signed by two directors or a director and company secretary (following the Companies Act 2006, this is now extended to a company director in the presence of a witness).
In this case, Lendlease engaged Aecom as a sub-contractor by way of a consultancy agreement which, if properly signed as a deed would have resulted in a limitation period of 12 years (rather than six years from the date of accrual of the cause of action, meaning that the claim was time barred). The agreement contained an execution block requiring the affixing of Aecom’s seal in the presence of two directors. However, no seal had been used and the two directors that signed were not statutory directors.
The court held that the agreement was in fact a deed, and that Aecom was ‘estopped’ from arguing that the agreement did not operate as a deed. By putting forward two ‘directors’ to sign on behalf of the company, Aecom represented that the signatories were able to sign deeds and this representation was relied upon by Lendlease (who entered into the agreement on the basis of the signatories asserting their authority).
It is rare for courts to consider whether a deed is validly executed, hopefully because those involved in their execution spend time and energy ensuring that they are validly executed. Given that this case turned very much on its facts, we would still caution that parties executing agreements as deeds are careful to ensure that the statutory requirements are met. In the age of electronic signatures, this should mean putting forward statutory directors to sign and also ensuring that witnesses are in the room to witness that electronic signature.
The content of this article is for general information only. It is not, and should not be taken as, legal advice. If you require any further information in relation to this article please contact the author in the first instance. Law covered as at February 2024.