A trap for the unwary: Construction contracts under Seal (Law note)
Have you ever signed a contract that was “under seal”? You probably have, and you probably have done so without really understanding what it means. In North Carolina, a contract “under seal” means that the contract can be enforced for ten (10) years instead of the usual three. In other jurisdictions, the contract can be enforced for even longer periods of time. [For example, in Delaware, a contract under seal extends the time for brining a claim to twenty (20) years!] Since a sealed contract extends your liability significantly, it is not something you should do lightly.
The phrase “under seal” comes from the old tradition of using a unique wax symbol (such as an engraved signet ring) to identify the owner signing the contract. Today, however, you sign under seal when the words “under seal” or even just “[Seal]” is printed next to your signature, like this:______________ [SEAL] Melissa Dewey Brumback
While it is good to know about seals in general, construction professionals should be more concerned than ever about sealed contracts following a recent North Carolina Court of Appeals decision, Davis v. Woodlake Partners. The Court in Davis held that in a contract to purchase improved property, signed “under seal,” extended the statute of limitations to the ten year statute as authorized by N.C. Gen. Stat. 1-47(2). This is despite the fact that there is a six year statute of repose in North Carolina. In the case, the lawsuit was brought within the 6 years, but outside of the 3 year statute of limitations for ordinary contracts. The Court found the action was timely because of the “sealed” nature of the contract.
What does this mean for construction contracts? You could find yourself liable on a construction contract longer than you intended. Does this case apply in a situation where the 6 year statute of repose was violated? The Court was not faced with that issue, so it’s too soon to tell. The case was a divided opinion, so the state Supreme Court may be weighing in on the issue. Stay tuned.
In the meantime, consider striking through any “seals” on your construction contracts.
Your turn. Take a look at the last contract you were asked to sign. Was it “under seal”? Did you know what that meant when you signed it? Share below.
Photo (c) Losinpun.