In this January 2008 blog post I noted that the requirements for what constitutes a “contract under seal” have been relaxed to the point of ludicrousness. But I also noted that in some states whether a contract is under seal has a bearing on which statute of limitations applies.
From @Richards1000‘s prolific Twitter outpouring I learned today of this post by the Delaware Corporate and Commercial Litigation Blog noting that in a recent opinion in a long-running lawsuit, the Delaware Chancery Court applied the twenty-year statute of limitations for contracts under seal.
Contract drafters should take into account external irrationality of this sort. For a given contract, check whether by statute the governing-law jurisdiction still recognizes contracts under seal and applies a different statute of limitations to contracts under seal. If it does, you may want to revise the contract in question so as to make it *rolls eyes* a contract under seal.
4 thoughts on “A Reminder that Contracts Under Seal Are, Sadly, Still Relevant”
Ken, in England and Wales, the distinction has evolved into one between ordinary contracts and contracts made as “deeds”. The consideration point applies under English law, which is why some documents are commonly executed as deeds (eg formal assignments of IP). The limitation period for deeds is 12 years rather than 6 years for breach of ordinary contracts (“contracts under hand”), although I have rarely encountered agreements made as deeds for this reason. If anything, the trend is towards seeing boilerplate clauses that say claims must be brought within a shorter period, eg 1 year.
The signing formalities for deeds are slightly different to ordinary contracts, and usually require two signatures or one signature and a witness (too tedious to go into the detail here). Since 1989, individuals and most companies don’t need to apply a seal to a deed, but a few organisations still need to do so (eg Govt departments and universities). Older companies tend to have an official seal stamp, although often no-one can remember where it is.
Some years ago, I was involved in negotiations between my client, a UK company, and a large Massachusetts corporation. The Massachusetts corporation’s draft agreement included a signature block referring to the parties applying their seal. I queried this, saying we weren’t planning to apply our seal to the contract. They deleted the reference without making any comment, but I never found out why it was there in the first place. I assumed it was just boilerplate that nobody ever read, and I wondered privately whether that corporation even had a seal.
PS some people even write whole books on this kind of stuff! Eg see http://www.lawsocietyshop.org.uk/ecom_lawsoc/public/saleproduct.jsf?catalogueCode=9781853286995
Mark: I wrote about deeds in this May 2009 blog post.
And I’ve grown used to my noting that a particular usage is inane, only to have someone say how it’s central to the English way of drafting :-) .
As an example, the noted concept continues to have relevance here in the great State of Maryland, whereby, generally speaking, a contract under seal is a “specialty” and is accorded a 12 year SOL’s (as opposed to the 3 year norm). However, per caselaw, just putting (Seal) next to the signature line(s) is not sufficient. Some reference to under seal must at least be in the body of the agreement (which includes the testimonium clause).