A contract (sometimes referred to as a contract underhand) and a deed are the two ways in which a binding legal agreement can be documented.
In the majority of commercial transactions, a contract will be used to document the relationship between the parties (such as that of a manufacturer and a retailer). Whilst a contract does not need to be in writing, it is advised for record keeping purposes that it is.
For a contract to be binding, there needs to be a clear offer, acceptance, consideration (i.e. cash changing hands) and the mutual intention of the parties to be bound legally. The contract is typically executed by both parties (or authorised representatives thereof) and will be binding and in effect from the date of the document.
Deeds on the other hand do not need consideration to have changed hands between the parties for the agreement to be legally binding and enforceable. A deed must be ‘prima facie’ a deed, must be in written form, validly executed and delivered (this does not mean physically delivered, rather when the parties intend to be bound – deeds are commonly stated as being delivered upon execution).
There are certain documents which have to be executed as a deed, such as powers of attorney and a handful or real estate related documents.
Deeds may also benefit from an extended limitation period, that being the amount of time after a contractual breach a claim can be brought. For contracts this is 6 years following the breach giving way to the claim, however for deeds this is typically 12 years.
Overall, in a typical commercial transaction where money is changing hands, a contract tends to be the preferable form of agreement. However, where money is not being exchanged or the parties wish to rely on an extended limitation period, then a deed may be more appropriate.