A deed is a formal document that performs a particular function. It must convey some interest in property or it must create an obligation required of some person. With a few exceptions, certain transactions are only fully effective if they are done by deed. For example, agreements involving land, such as conveyances, transfers, mortgages, charges, leases and surrenders of legal estate or interest in land must be by deed. Also, the grant of a power of attorney must be by deed.

A deed has two main benefits, as opposed to a simple contract. First, it is enforceable without consideration — a legal concept that requires both parties to exchange value under a contract; and secondly, it has a limitation period of 12 years rather than the six-year limit applicable to contracts.

Section 6A of Bermuda’s Conveyancing Act 1983 states that “notwithstanding any rule of law— an instrument shall be a deed if it complies with the requirements of subsection (2).”

Those requirements are: (a) that it makes it clear on its face that it is intended to be a deed by the person making it or, as the case may be, by the parties to it (whether by describing itself as a deed or expressing itself to be executed or signed as a deed or otherwise); and (b) it is validly executed as a deed by that person or, as the case may be, one or more of those parties.

Although Bermuda has its own legislation, United Kingdom (UK) law guides us where it is applicable. Accordingly, it is appropriate to consider the UK’s Law Commission Report no. 253 which defines 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.”

In order to be effective, deeds must comply with certain formalities, the need for which explains why a deed is regarded as being in “solemn form”.

First, a deed must be in writing — that is, it must be an intentional recording of words in a visual form, whether by handwriting, printing, typewriting or any other tangible form. Secondly, an instrument (i.e. a formal legal document in writing) is not a deed unless it makes it clear on the face of the instrument that the persons making it intend it to be a deed. This is the “face value requirement”, which is satisfied if the parties describe it as a deed or express it to be executed or signed as a deed. For example, if the instrument is headed with words such as “This Deed —” or states that it is “executed as a deed”, this would make it clear to the parties that the instrument in question is a deed.

Thirdly, the instrument must be validly executed as a deed. The term “executed” in this regard means that the deed must be signed by the parties to it. There is now no requirement for deeds to be sealed as this practice is regarded as outdated.

Consequently, in the case of an individual, “execution as a deed” can be accomplished by simply signing it in the presence of a witness, who also signs the deed. An individual can still seal a deed by simply drawing a small circle next to his or her signature and writing the initials “L.S.” in the centre.

However, the addition of a seal has no additional effect. Historically, companies were required by statute to affix their corporate seal to various instruments or documents, most commonly, deeds. The use of the corporate seal for executing such documents is obsolete in modern day commerce. It is now possible, under the provisions of the Companies Amendment Act 2006, for companies to execute deeds and other instruments simply by means of the signature of an authorised person. Companies that wish to continue to use a seal can still do so and any deed or document to which the common seal is affixed will bind the company.

Finally, to be completely effective, a deed must be “delivered”. Historically, this is the placing of the deed in the grantee’s hand or in the grantee’s control. By this act, the grantor shows an intention that the deed operates immediately. A deed is also delivered when a party indicates an intention to be bound by the deed, even though that party keeps possession of the document. Delivery fixes the date at which the parties are bound. In the absence of an express right of revocation within the deed, once delivered, a deed is irrevocable. It does not matter whether this intention is actually communicated to the other party.

Knowing and following the formalities for preparing and executing a deed is very important as failure to do so could render the deed unenforceable and void.

Attorney Jackie Stirling is a member of the Trusts Practice Group at Appleby. A copy of Mr. Stirling’s column can be obtained on the Appleby website at www.applebyglobal.com. This column should not be used as a substitute for professional legal advice. Before proceeding with any matters discussed here, persons are advised to consult with a lawyer.