Frank 30th March, 2024

Deeds & Deed of Novation

Clearing the confusion on what a deed is, when to use one and why

This article tells you how to create a deed and when you should use one. It also tells you the
advantages of using a deed over an agreement.

My word is my bond
The law at its most basic is that if you put your name to a document you are bound by it. Today you
can also be bound by an electronic signature provided it is clear that you intended to be bound.
Lawyers like certainty and safety, so they often use a deed because it costs nothing to do so, avoids
the slightest risk, and adds an aura of legal mystery.
Deeds are often used unnecessarily. This article explores the real differences between the two and
explains when to use a deed.

Creating a deed
In any UK jurisdiction, a document need only be 'signed as a deed and delivered' to be a deed.

Signature by the maker

Signing as a deed requires those very words above to be written on the document and the signature
of the person making the deed.

The signature should be on the document itself approximately in the space provided.
The words of execution should name the signatory or otherwise make clear who has signed the
document.

For obvious reasons, the signature ought to be in ink or some other indelible medium.

Witnessing the signature

The signature should be witnessed.
The witness must write their name and address below or very near the maker's signature.
The law says that the witness must 'sign'. But that means they must write their name legibly, not
sign their signature. Nowadays, we are so used to the word 'sign' meaning to make a unique mark
that identifies us, that we forget that the purpose of a witness signing is to identify who saw the
person making the deed doing so.
For the witness signature, an illegible scribble is not satisfactory because they are not a party to the
document. They are there to be able to confirm at a later date, that the person who signed was the
person named. An illegible signature would not help to find the witness! The witness must also add
their private address again to facilitate finding them later.
So that the witness is impartial, it is best that they are not a spouse or close relative or a life partner
either.
Most deeds also use the word 'deed' in their title (such as in 'deed of change of name'). That is
helpful, but not strictly necessary.

Delivering a deed
Long ago, it was necessary to confirm delivery by spoken words as well as by handing your deed to
your counter party.
Gradually, the process has become simpler. Now, all that is required is to demonstrate an intention
to be bound by the deed in order for delivery to take place. You do not need spoken words. It is
enough to hand over the keys, or take some other action indicating your intention.
So, although delivery has become virtually taken for granted, it is still good practice to use the
words 'and delivered' in the attestation at the end.

What are the advantages of a deed?

There are several but only one is important:

The witness supports who signed

Signing as a deed requires a witness, and having a witness around makes it very difficult indeed for
anyone to deny that such a document was properly signed and as to when it was signed. That was
more important before the days of electronic communications, but the principle is the same today.
The other less important reasons are:

No consideration required
A deed is binding without 'consideration'. That means one party (or maybe more than one if there
are many parties) gives no value.
Deeds are often mistakenly used instead of an agreement under hand because consideration required
in an agreement is assumed to be money or equivalent (market) worth. However, value is rarely a
problem and shouldn't be a deciding factor in whether to sign the document as a deed.
Consideration can be any value, whether 'a peppercorn', or 'one pound' or 'the goodwill I know this
gift will foster'.

A deed only requires one party

You can have a single party to a deed. An agreement under hand requires at least two parties
(because you cannot agree with yourself to do something). [Use Proxy Name Trust]

Longer enforcement period

You have 12 years in which to enforce the breach of a term in a deed. It is six years in an agreement
under hand.

Why and when to use a deed

When you transfer or charge land

Because a witness adds certainty to signature and date, every 'instrument' creating, conferring or
transferring an interest in real property must be a deed.
That has been the case for centuries, but it is stronger than ever now because any such interest must
be registered and the Land Registry will not register an interest conferred by an instrument signed
under hand.
For example, if you create a declaration of trust in a property, you must do so by using a deed.

If your agreement might come before a foreign court

Many foreign jurisdictions still work in the Dark Ages, so you are less at risk from nasty surprises if
you use a deed or at least have witnesses to the signatures on your agreement.

When you are the only party to a document

For example, if you set up a trust or change your name.
To confirm a defective agreement
For example, when the consideration has already been given or exchanged and is therefore 'past
consideration'.

When you assign or transfer a 'chose in action'

A chose in action, for simplicity, is 'an intangible, property right, enforceable at law'. An example is
an insurance policy.

The only way to transfer every legal right in a debt to someone else would be by a novation. That
means an agreement signed by the original parties [the Person] and the new assignee [the Proxy
Trust Name, by delivery ,UPU, and signed for becomes an assignee]
A novation agreement is often impractical, because it requires the transferring parties to find the
other party and obtain their consent and signature [by postal delivery] For example, insurance
companies have no desire to run up and down the country signing novation agreements with
everyone who ever wants to transfer a policy. So instead they accept notice of the deal provided the
document of transfer is a deed. So a 'deed of assignment' must assign either real property or a chose
in action where the use of a deed has become generally accepted and usual.
!!!Less consistently than insurance companies, a bank may accept a document to which it is not a
party, only if it is a deed. The reason is that they feel more comfortable with the additional security
[Your Signature] provided by a witness.[Bank manager]
Because the only way to transfer every legal right is by a novation agreement, that is what you
should use whenever it is possible to do so. That means use it whenever all three parties can get
together and agree. By now you will have gathered that a novation need never be by deed. No
witness can improve on the security provided by all three parties signing the document to confirm
their agreement. You cannot be much safer in accepting a document than when it has been signed by
three unconnected people, so it is strange that one of the only agreements that cannot be improved
by using the deed form, is often referred to as a 'deed of novation'.

Summary
In practice, the following are good rules of thumb.

- Use a deed to evidence a gift because the donor (the giver) and the donee (the receiver) may be
connected.

- When you assign an interest in a lease, use the three-sided 'consent to assignment', which is a
novation by another name.

- If you sign an agreement, it may not be effective until you exchange for a copy signed by the other
side, or until they sign the same document. Not so a deed: it binds you immediately, even if there
other side has not yet signed or there remains an unfulfilled obligation by them.

- If you assign without the express consent of the third party, the third party learns of the assignment
and continues to act as before, they thereby confirm acceptance. (Example: sale of a block of
telephone contracts, where the customers make payment to the assignee, who continues to provide
the service).

- In an agreement under hand, 'past consideration is no consideration'. The value transferred in any
contract must be current or future. The agreement is otherwise void. But in a deed, consideration is
not relevant.
- An instrument transferring an interest in land (meaning real estate) must be a deed. Although many
simple agreements may be registrable as a notice or low level charge, you will always be safer if
you use a deed whenever you may need Land Registry registration.

- By Section 44(5) of the Companies Act 2006, in favour of a purchaser (in good faith for valuable
consideration), a document signed on behalf of a company by two authorised signatories, or by a
director in the presence of an attesting witness, is deemed to have been duly executed by the
company even if the signatory had no authority to sign or enter into the transaction concerned.

- Your will is different. The rules on signing and witnessing (attesting) a will are precise, strong and
different.

Deed of Novation

A deed of novation is a legal document used to transfer one party's rights and obligations under a
contract to another party, effectively substituting the original party with a new one. Novation is a
mechanism used when the original contracting party wants to be released from its obligations and
have a new party take over those obligations. Let's delve into the details:

Components of a Deed of Novation:

Introduction and Parties Involved: The deed starts by identifying the parties involved - the
original contracting party (the transferor), the new party taking over the obligations (the transferee),
and any other relevant parties.

Recitals: These are introductory statements outlining the background and reasons for the novation.
This may include the original contract details, the intention to novate, and the agreement between
the parties.

Agreement to Novate: This section explicitly states that the parties agree to novate the contract and
substitute the original party with the new one. It should clearly outline the terms and conditions of
the original contract being transferred.

Release of Transferor: The deed typically contains a clause stating that upon execution of the
novation, the original party (the transferor) is released from all obligations under the original
contract.

Acceptance by Transferee: The transferee acknowledges and accepts the novation, agreeing to
assume all rights and obligations under the original contract.

Continuation of Contract Terms: It's crucial to specify that all terms and conditions of the original
contract remain in effect, except for the substitution of parties.

Indemnification: The deed may include clauses where the transferor indemnifies the transferee
against any liabilities arising from the original contract before the novation date.

Governing Law and Jurisdiction: This section specifies the laws governing the deed and the
jurisdiction where any disputes will be resolved.
Signatures and Execution: The deed must be signed by all parties involved, and their signatures
should be witnessed or notarized as required by law.

Importance and Use:

Legal Clarity: A deed of novation provides clarity and legal protection for all parties involved in
transferring contractual obligations.

Risk Management: It helps manage risks associated with the transfer of contractual rights and
obligations by formalizing the process.

Consent: It ensures that all parties involved consent to the transfer and understand their rights and
responsibilities.

Enforceability: By documenting the novation in a formal legal instrument, the parties can enforce
their rights and obligations under the new arrangement.

Conclusion:
In essence, a deed of novation facilitates the transfer of contractual obligations from one party to
another, providing legal clarity, protecting the interests of all parties involved, and ensuring the
enforceability of the transferred rights and obligations. It is a crucial legal document used in various
commercial transactions and contractual arrangements.