A trap for the unwary: Construction contracts under Seal (Law note)

signing contractHave 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.

Add a comment »4 comments to this article

  1. Interesting, I had never realized this. It makes me want to read over my past contracts to see if any are under seal. Thanks for sharing!

    Reply

    • Sure thing, Steve. Depending on what jurisdiction you are in, it may or may not matter to you.

      Reply

  2. Melissa – This is interesting. I’ve actually never heard of this “contract under seal” concept, and it’s a little bizarre to me. The lack of significance by the term [Seal] after a signature is obvious, but there are clear long term implications to such a tiny event. I don’t know of any principle like this in any of the states where I’m licensed (CA, WA, OR, AZ, LA, GA). Or, it may just be one of those little things buried in the law in those states and I don’t know anything about it.

    Always cool to learn something completely out of left field and new…and another reminder that the law contains so many nuances, it fills the business world with tiny land mines if folks are not careful, and represented.

    Reply

    • Scott: Thanks for your comments. Yes, it is interesting that something fairly standard in one state is not even a concept on the radar in another state. Goes to show that folks really do need to discuss their legal situate with someone licensed in the state at issue, and not just their “ex-roommate’s-brother-in-law-who-happens-to-be-an-attorney-somewhere”! BTW, 6 state licenses?? The CLE requirements alone must be enormous for you!

      Reply

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