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When should an employment contract be signed as a deed?

07 September 2021

Sometimes it will be necessary for the employment contract to be signed as a deed, rather than as a simple contract. The most common reason for signing the employment contract as a deed is because it contains a power of attorney (to be effective, a power of attorney must be signed as a deed).

Power of attorney clauses will be necessary:

  • If there are intellectual property rights that the company wants to protect
  • To procure the transfer of shares or resignation of offices after termination

The contract should also be signed as a deed where there may not be any consideration. In the employment context, the absence of specific consideration for a change introduced once employment has commenced will rarely be an issue, since consideration can readily be found in the employee's continued employment. However, there may be issues if the change will not take effect immediately or the employer is simply promising to perform an existing contract.

Consequently, restrictive covenants introduced during the employment relationship should have specific consideration assigned to them, either expressed as a lump sum or expressed as being linked to a pay rise. As most employers are cautious about restrictive covenants, they may decide to execute such a variation as a deed.

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