Introduction
Contracts can generally be made orally or in writing. In most cases, contracts are made in writing as the parties then have a record of what was agreed which can be used as evidence. Most people will have heard the Samuel Goldwyn quote: “A verbal contract isn’t worth the paper it’s written on”!
Some contracts are, however, required by law to be in writing. For example, contracts for the sale of land or to provide a guarantee.
There are two forms of written contract under English law: i) contracts written “under hand” (commonly known as “simple contracts”); and ii) “deeds”.
Differences
Most contracts made in writing will be simple contracts but some will be deeds. Deeds are used because either the law requires their use or because a deed has certain advantages. The differences are:
a simple contract can be entered into orally but a deed must be in writing;
a deed must make it clear that it is intended to be a deed. This will often mean specific wording is inserted above the signatures confirming that the document is intended to be a deed;
under a simple contract each party has to provide “consideration” for it to be valid. “Consideration”, in simple terms, is the price paid by each party. Often, this will be the provision of goods or services by one party and the provision of money by the other but it could be anything of value. Deeds, on the other hand, do not require consideration in order for them to be valid. It is therefore advisable, for example, that a contract for the provision of a gift is drafted in the form of a deed or it is likely to be unenforceable due to lack of consideration from one party;
a deed requires additional formalities in relation to its signature/execution for it to be enforceable. Depending on whether the party signing/executing is an individual, company or other legal entity, signatures will require witnessing or more than one signatory will be required;
simple contracts have a statutory limitation period of six years. The effect of this is that a claimant must make a claim for breach of contract within six years of such breach. Deeds have a limitation period of twelve years.
This should not be relied upon for legal advice. If you would like any further information or advice please email richard@clariclegal.co.uk.