Contracts under seal v under hand
Contents |
[edit] Introduction
Contracts may be executed under seal (signed by the parties, witnessed and most importantly made clear that it is executed as a deed - see below) or under hand (a 'simple contract' that is just signed by the parties).
[edit] Consideration and limitation periods
There are two important differences between simple contracts, and contracts that are under seal (deeds):
Firstly, simple contracts and contracts under seal have different limitation periods. An action founded on a simple contract cannot be brought after six years from the date on which the cause of the action accrued. The limitation period for a contract under seal is 12 years.
Secondly, unlike a simple contract, a contract under seal does not have to be supported by valuable consideration.
For example, where a collateral warranty consists of unilateral undertakings by one party, the contract must be a contract under seal if it is to be enforceable. It is important to note that whilst consideration is not necessary for a contract under seal in the absence of valuable consideration and, arguably, in the absence of something more than mere nominal consideration, the remedy of specific performance will not be available in respect of the contractual undertakings (see Milroy v Lord).
Specific performance is an equitable remedy requiring the contract breaker to fulfil their contractual obligations, rather than awarding damages for breach. Equity does not assist a volunteer, hence the need for consideration. It is suggested that a deed, which relies on merely nominal consideration, could be rescued by the addition of a consideration, which consists of ‘the mutual undertakings’ of the parties to a deed.
[edit] Legislation
Much of the law relating to the execution of deeds was swept away on 31 July 1990 by the Law of Property (Miscellaneous Provisions) Act 1989 dealing with the execution of deeds by individuals, and by the Companies Act 1989 dealing with the execution of deeds by companies.
Section 1(3) of the Act provides that a deed must be signed by the person who is to be bound and the signature must be attested by a witness. If this procedure is not followed then the document will not be valid as a deed.
Section 1(2)(a) provides that a document shall not be a deed unless it is made clear on its face that it is intended to be a deed by the person making it. It follows that the document must be described as a deed and the attestation clause must include a statement that it is being executed as a deed. If such descriptive words are not included then the document will not be valid as a deed.
The Act does not abolish the old common law rule that to be effective a deed must be delivered by the person who is to be bound. Delivery does not mean the physical handing over of the document but the evincing of an intention, whether by words or conduct, that the party is to be bound. Such intention was satisfied prior to the Act by signature and it is submitted that signature will continue to satisfy the requirement of delivery.
Companies may still use their seals to execute a deed provided that this is in accordance with their Articles of Association. Section 130 of the Companies Act 1989 introducing a new section 36(a) to the Companies Act 1985 provides by sub-section 4 that if a document is signed by a director and the secretary of the company or by two directors of the company and is expressed (in whatever form of words) to be executed by the company it will have the same effect as if it had been executed under the common seal of the company, i.e. a deed.
Further, sub-section 5 provides that a document which makes it clear on its wording that it is intended to be a deed has the effect of a deed even though the specific requirements for execution dealt with in sub-section 4 above are not complied with. For example, a document that is described as a deed and is executed by one director of the company will operate as a deed. Extreme care must be taken to ensure, if it is intended only to create a simple contract, that a company giving a collateral warranty does not accidentally execute the document in such a manner as to give rise to a deed.
[edit] Related articles on Designing Buildings
- Articles of agreement.
- Breach of contract.
- Causes of construction disputes.
- Collateral warranties.
- Contract claims.
- Construction contract.
- ESignatures.
- Engrossment.
- Letter of award.
- Litigation.
- Technology and Construction Court.
- Title.
[edit] External references
Featured articles and news
The UK's Modern Industrial Strategy: A 10 year plan
Previous consultation criticism, current key elements and general support with some persisting reservations.
Building Safety Regulator reforms
New roles, new staff and a new fast track service pave the way for a single construction regulator.
Architectural Technologist CPDs and Communications
CIAT CPD… and how you can do it!
Cooling centres and cool spaces
Managing extreme heat in cities by directing the public to places for heat stress relief and water sources.
Winter gardens: A brief history and warm variations
Extending the season with glass in different forms and terms.
Restoring Great Yarmouth's Winter Gardens
Transforming one of the least sustainable constructions imaginable.
Construction Skills Mission Board launch sector drive
Newly formed government and industry collaboration set strategy for recruiting an additional 100,000 construction workers a year.
New Architects Code comes into effect in September 2025
ARB Architects Code of Conduct and Practice available with ongoing consultation regarding guidance.
Welsh Skills Body (Medr) launches ambitious plan
The new skills body brings together funding and regulation of tertiary education and research for the devolved nation.
Paul Gandy FCIOB announced as next CIOB President
Former Tilbury Douglas CEO takes helm.
UK Infrastructure: A 10 Year Strategy. In brief with reactions
With the National Infrastructure and Service Transformation Authority (NISTA).
Ebenezer Howard: inventor of the garden city. Book review.
The Grenfell Tower fire, eight years on
A time to pause and reflect as Dubai tower block fire reported just before anniversary.
Airtightness Topic Guide BSRIA TG 27/2025
Explaining the basics of airtightness, what it is, why it's important, when it's required and how it's carried out.
Construction contract awards hit lowest point of 2025
Plummeting for second consecutive month, intensifying concerns for housing and infrastructure goals.
Understanding Mental Health in the Built Environment 2025
Examining the state of mental health in construction, shedding light on levels of stress, anxiety and depression.
Comments
To start a discussion about this article, click 'Add a comment' above and add your thoughts to this discussion page.