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 »8 comments to this article

  1. Our contracts do not have ” “under seal” or even just “[Seal]” is printed next to your signature”. However in the text above the signature lines (for our company and the clients) we have “IN WITNESS WHEREOF, the parties hereto have set their hands and seal the date and year first written above.”

    Can you tell if we have sealed the date only or are we “under seal”?

    Thanks you, Anne Brown

    Reply

    • In that case, I could argue either way. If, however, you are thinking you may have a claim, I would err on the side of caution and assume that the contract is NOT under seal since it does not say it next to the actual signature.

      Reply

      • Hi Melissa,
        Thanks for your response to me, Anne Brown, on March 23, 2016 at 1:49 pm.

        I may not have been clear, so just to be sure – I am the contractor/builder and my company mostly uses our own contracts (sometimes the AIA contracts). So the contracts originate in our office and are signed by us and our clients.

        It sounds like you may have thought you were corresponding with a client who possibly had a claim against a builder.

        Can you give an opinion on whether we are “under seal” in this scenario? We certainly didn’t intend to be! We put our contract together and refined it over the years using contracts from friends in the business and consulting with our lawyer. The wording in question was simply carried over from another document.

        Thanks again, Anne Brown

        Reply

        • Anne:
          Thanks for the clarification. Since I am a lawyer, I always like to err on the side of caution. In your case, as the contractor, I would change the contracts to avoid the word “seal” altogether. Simply remove the “In Witness Whereof” language, and replace it with an “Accepted by/On behalf of” or similar. It may or may not make a difference in a lawsuit, and I would certainly argue in your position that it is NOT under seal, but why give the lawyer for the other side something to argue about later on? Hope that helps!

          Reply

  2. 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

  3. 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

Leave a Reply to Anne Brown Cancel reply

This site uses Akismet to reduce spam. Learn how your comment data is processed.

Copyright © All Rights Reserved · Green Hope Theme by Sivan & schiy · Proudly powered by WordPress

%d bloggers like this: