Difference between a deed and a contract proves crucial in dispute

When drawing up business agreements the method used can prove crucial, as seen in a recent case before the High Court.

Stephanie Johnson, Senior Associate Solicitor, reports on this recent case.

Lendlease Construction (Europe) Ltd wanted to bring a claim against consultancy firm Aecom Ltd in relation to the construction of the oncology centre at St James’s Hospital in Leeds.

The issue was whether the agreement between the two companies amounted to a deed or a contract.

A deed is subject to more legal formalities than a contract but the key point in this case was that under a contract, claims must be made within six years; under a deed, that period is extended to 12 years.

Lendlease wanted the agreement to be classed as a deed; otherwise, its claim would be time barred.

The problem it faced was that the agreement had been signed by two Aecom employees, not two statutory directors as normally required by law. They had also not signed in the correct place on the document but had used the block designed for affixing the company seal.

Despite these discrepancies, the court found in favour of Lendlease and said the agreement was effective as a deed.

It held that there had never been any intention to use a seal and so signing in that space was not enough to prevent the document being considered a deed.

It was true that the signatories were employees not directors. However, Aecom had put them forward as having the authority of directors to sign and so could not now deny that they had such authority.

If you would like more information about the issues raised in this article please call Stephanie on 01228 516666 or click here to send her an email.