In a previous blog post we looked at what deeds are, when and why they are used, and the importance of ensuring they are validly executed in the eyes of the law. In this post we will look at the delivery element of deeds.
Point of no return…
The famous phrase (and lyrics) ‘signed, sealed, delivered’ still applies to deeds, except that an official seal is no longer needed (although is optional for companies). Once executed and delivered, the parties are bound by the deed and it cannot be revoked, unless there is a right to do this in the terms of the deed itself.
But what is delivery? Delivery of the deed is essentially when the parties agree to be bound by the terms of it. For a company or other corporation this is presumed to be when the deed is executed unless there is contrary intention shown by the parties. There doesn’t have to be actual physical delivery of the document, it is intention that is key.
Often delivery of a deed in a financial transaction happens on completion, that is, when all of the parties or their lawyers are happy that everything is signed and in place and all of the documentation and deeds are then dated, and the funds are released.
Usually the ‘contrary intention’ is shown by the use of conditions precedent which must be satisfied before completion can happen or by a statement in the deed that it is to be treated as delivered on the day it is dated, with the deeds being dated by agreement at completion, as mentioned above. This is a convenient way for parties to a transaction to enter into deeds when they may be located in different parts of the country or even the world!
Sometimes a deed will be held in ‘escrow’ which means the parties execute and deliver the deed with an intention for it only to become binding once certain conditions are fulfilled. In these circumstances the parties cannot back out once the document is executed and delivered, again unless there is something in the deed allowing them to do so.
Sorry for the delay!
Often in a transaction, depending on the size, geography, and number of parties involved, there may be significant delays between the physical signing of the deeds and the delivery of them at completion.
In our previous blog we looked at the way companies can enter into deeds, but what if a director or company secretary who signed the deed, subsequently resigns before the deed is delivered?
Fortunately the High Court has clarified this point. In a recent case a sole director, Mr Armstrong, signed a debenture as a deed for the company, witnessed by the company secretary Ms Tattersall. By the time of completion in September 2008, Mr Armstrong had resigned from his position and was replaced by Mr Bojko.
When the company later went into administration the court was asked to determine whether the debenture was validly executed and delivered as a deed.
The court held that it was more likely than not that Mr Armstrong signed the documents in June 2008 based on the company’s board minutes and resolutions. As he was a director at that time and had been authorised to sign the debenture this was enough to fulfil the execution requirements.
It did not matter that the debenture was not in fact delivered until after he had resigned three months later as the company agreed to be bound by it in a board resolution signed by Mr Bojko in September 2008.
This decision of the Court seems sensible taking into account the (sometimes unavoidable) delays that occur during a transaction. However it is always preferable to ensure the person signing the deed is still in office at the point of completion unless there is clear documentary evidence to show they were a duly authorised director at the time it was signed.
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