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What you need to know about performance under deeds

What is a deed?

A deed is an instrument which either itself passes an interest, right, or property creates an obligation binding on someone or is an affirmation or confirmation of something that passes an interest, right, or property. For an instrument to be considered a deed at common law, it needs to comply with these formalities: (a) be written on parchment, vellum, or paper, (b) be sealed, and (c) be delivered. However, in NSW, this has been modified by the Conveyancing Act 1919 where according to s 38 it also needs to be signed to be executed and attested.

What are the nature of the promises made under a deed?

The promises made in a deed are a covenant between the parties if there are words to the effect of someone doing something or making a payment and that person is a party to the deed. These promises are also a covenant whereby they are an agreement of the parties under seal and every form of the words in the deed indicate that an agreement will, when under seal, form a covenant.

What are the consequences of repudiation of a deed?

Once a deed has been executed based on the formalities discussed above, the party is fully bound by the deed's provisions and cannot resile from it or recall it. The notion of repudiation assumes that all the conditions must be so essential that their non-performance can be reasonably considered by the other party as a crucial failure to perform the deed or contract at all. When a party's conduct shows an intention to exclusively perform the contract in a way that is substantially inconsistent with the party's obligations, it amounts to a repudiation of the agreement which entitles the party not in breach to treat the agreement as at an end.

However, at common law, termination for breach or acceptance of repudiation does not terminate the deed ab initio, that is, it does not treat the contract as invalid from the moment in which it was entered. Both parties are likely to be discharged from further performance under the deed but rights that have already been unconditionally acquired are not discharged. Ultimately, whether a right is accrued such that it survives the termination from repudiation depends on the terms of the deed and how these terms are interpreted by the court.

What remedies are available to the party not in breach?

The party not in breach may seek damages. If the party fails to establish that the breach of deed caused any loss or that the party suffered damage due to failure to perform, then the party may only seek nominal damages as opposed to compensatory damages. Nominal damages acknowledge the breach of a legal right and the court may provide damages as it feels fit to acknowledge this breach. Compensatory damages may be claimed if the party is able to establish successfully that the breach of deed caused the loss.

If the promise was not made under seal or with valuable consideration (as possible under a deed unlike a contract), it may also be enforceable under promissory or equitable estoppel in Australia. This means, that equity can enforce the promise made by the defendant to a plaintiff if the plaintiff has acted to their detriment upon an assumption based on the other party where the other party has played a role in adopting this assumption such that it would be unjust for the defendant to be left free to ignore it. In these situations, unconscionable conduct by the other party in ignoring the assumption must be existent to allow equity to intervene and aid the plaintiff.

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