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Delivery of Deeds (Bibby Financial Services Ltd v Magson)

01/02/2012

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United Kingdom

Delivery of Deeds (Bibby Financial Services Ltd and others v Magson and others)

Delivery of Deeds (Bibby Financial Services Ltd and others v Magson and others)

Unlike simple contracts, deeds do not take effect on execution, but on delivery. Identifying if and when delivery has taken place is therefore essential, as it is the date from which the party giving the deed is bound, if at all. The question of whether individuals were bound by guarantees and warranties in the form of deeds was recently addressed by the High Court in Bibby Financial Services Ltd v Magson [2011]. It was held that the individuals had not delivered the deeds in question, despite these having been physically handed over to the other side after signature. Bibby therefore serves as a useful reminder of the English law on the delivery of deeds, and as a stark warning to anyone seeking to rely on deeds in the absence of proper delivery.

The defendants in Bibby contended – and the High Court agreed – that, although they had in fact signed and handed over the deeds in question (in a pub, no less), they had done so on the basis that these were draft documents and not final versions, and that the deeds had therefore not been delivered.

The High Court's reasoning was that:

(a) the critical thing is that the person who has signed the deed must have separately indicated that he or she intends to be bound by the deed;

(b) mere signature is not enough; and

(c) the issue is not whether the document has been physically handed over to the beneficiary, but whether the person whose deed it is supposed to be intended to be bound by it.

The test for delivery of deeds is well-established in English law and it is an objective test based on the facts in a particular situation. Notably, the statutory presumptions regarding delivery that apply to deeds executed by companies do not apply to deeds executed by individuals.

We have set out some "Best Practice Tips" below, which we hope will be of practical assistance when dealing with the execution of deeds.

Best Practice Tips

1) Bibby clearly illustrates the dangers of signing documents that are still in draft form – deeds in particular should only be signed in their final execution versions.

2) Where deeds are being sent by email or fax, ensure that the entire document (and not merely the signature page) is sent. A full and final copy of the deed should be signed. Certainly one must not use the signature page of an earlier draft of a deed as the signature page for the execution copy. (This is as a result of the Mercury Tax case.)

3) If appropriate, include wording that defines the point at which delivery occurs (e.g. before the signature block: "Executed as a deed and delivered on the date stated at the beginning of this document.").

4) If a deed is to be revocable, the deed should be drafted to specifically enable revocation.

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