Deed

a contract which is enforceable even in the absence of consideration or acceptance. There are additional formal requirements for it to be executed - it needs to be delivered.

Signed, Sealed, Delivered - I'm yours

WHEN IS A DEED DELIVERED?

Historically, delivery occurred when the document was received by the other side. As the law evolved, the concept of delivery became the point at which it could be shown that it was intended that the document would become binding. This is still the test used today.

For companies, a deed is deemed to have been delivered in accordance with the provisions of the Companies Act. However, no deemed delivery provisions apply to individuals.

BIBBY V MAGSON

Bibby Financial Services Ltd (Bibby) offered an invoice discounting facility to a company and, as security for amounts due to Bibby, two directors of the company were required to enter into personal guarantees and warranties in respect of sums due.

The company defaulted. Bibby sought to enforce the personal guarantees.

The directors argued that neither the personal guarantees were not binding. because they were executed as deeds and while all signatures had been witnessed and the documents had been handed over, the directors asserted the documents had not been delivered.

The directors’ personal guarantees, even though signed and witnessed, were not in a final form: Manuscript amendments had been made with the intention that clean versions of the documents would be prepared incorporating the amendments, which would then be circulated and signed again.

At trial the directors’ argument won and Bibby could not enforce the documents as they had not been delivered as deeds.

ADVICE TO TAKE AWAY FROM THIS CASE

Whilst the case adds nothing new to the law surrounding the execution of deeds, it is a timely reminder that delivery of a deed should not be overlooked.

It is possible to include clauses in deeds setting out when delivery occurs, usually when the document is dated. An alternative would be for a side letter to be prepared stating that delivery has occurred.