Two neighbours entered into an agreement with regard to building a shed on part of a driveway they shared.  One had offered to pay for the shed as they were the only ones who were going to use it.  They followed the terms of the easement that recorded the shared driveway, and then proceeded to draft their own Agreement to record the arrangements.

Just when the party who had agreed to pay for the shed was beginning to excavate the land to begin building the shed, an issue arose between them with the other party claiming they did not understand that they were giving away certain rights, and seeking to cancel the Agreement.

The other party took legal advice and was shocked to find out that the Agreement they had signed was not enforceable as it did not provide any ‘consideration’. Consideration is providing payment or value of some kind to the other party to the Agreement. In the above case the neighbour not using the shed was receiving no benefit from giving up use of part of their shared driveway. 

For an agreement to be legally binding, it must include consideration.  Consideration does not however have to be provided if you are entering into a Deed.

Agreements and Deeds are similar ways to record legal promises but there are some important differences between them.

Agreements

An Agreement consists of a promise or an offer by A, acceptance of that promise or offer by B, an intention by both A and B to make the Agreement legally binding, and consideration.

Without consideration, A’s promise is gratuitous and cannot be legally enforced.

An Agreement can be oral, in writing, or partly oral and partly written, unless there is a specific requirement for an Agreement to be written (e.g. when transferring land).

Deeds

A Deed also contains a promise, but it does not require consideration for the promise to be legally enforced. Unlike an Agreement, a Deed must be in writing, it must be signed, and it must be witnessed by someone who is not a party to the Deed.

A Deed must then be delivered/provided to both parties to the Deed (which can be in electronic form nowadays).

Although this distinction may not sound important, it can cost someone dearly (such as one of the parties above) if you use the wrong format, and get caught out with an unenforceable contract.  It pays to take legal advice when entering into any form of legal arrangement.

 

Leading law firms committed to helping clients cost-effectively will have a range of fixed-price Initial Consultations to suit most people’s needs in quickly learning what their options are.  At Rainey Collins we have an experienced team who can answer your questions and put you on the right track.

 


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