Client Alert
February 15, 2010
Beware: Contracts Under Seal

Take note that adding the word “SEAL” near a signature line may have important consequences to how and when the contract can be enforced. This single word may extend the period of enforceability of that contract significantly. In some states, the word “SEAL” creates a “sealed contract,” turning a contract otherwise enforceable for up to three or six years, into a contract with a far longer enforcement period. This may be true even if the seal is pre-printed or if you did not intend to extend of the enforcement period beyond the normal statute of limitations.

A recent Delaware case has clarified the law of Delaware regarding sealed contracts. In December 2009, the Delaware Supreme Court found that a settlement agreement signed by an individual with the word “SEAL” near the signature was a sealed document and thus enforceable for 20 years, instead of 3, the normal statute of limitations for contract enforcement claims in Delaware. Previously, this rule was only thought to apply to a promissory note, mortgage, or specialty contract or else the instrument had to show the parties’ intent to seal the document.

The rules in Pennsylvania and New Jersey relating to sealed contracts vary slightly. In Pennsylvania, the parties must have shown an intention for the contract to be sealed for the word “SEAL” to have the effect of sealing the document and extending its period of enforceability to 20 years.  And in New Jersey, the enforcement period extends from 6 years for a non-sealed contract to a 16 year period for a sealed contract, but a merchant, bank, finance company, or other financial institution cannot enforce a contract under seal for the full 16 year period.

You should consult with counsel to review your specific situation. Please contact James F. Harker at (302) 425-5089 or jharker@cohenseglias.com, or Nella M. Bloom at (215) 564-1700 or nbloom@cohenseglias.com if you have any questions regarding documents filed under seal.

     
About our Business Law Group

The Business Law Group at Cohen Seglias offers a comprehensive suite of services to address a broad range of complex issues that confront our clients and their businesses. Our lawyers counsel and represent clients with respect to all aspects of business formation, contracting and management. Our collective expertise was developed through years of practice and dedication to advancing our client's interests.

The lawyers in our Business Law Group regularly work with clients in a number of areas including:

• Commercial Agreements
• Formation of Corporations, Partnerships and Other Business Entities
• Real Estate Matters
• Debt and Capital Restructuring for Financially Troubled Businesses
• Mergers and Acquisitions
• Corporate Governance
• Litigation Relating to Commercial Disputes

Practice Group Members:
Marian A. Kornilowicz, Chair
Steven D. Usdin, Co-Chair
Robert K. Beste, Jr.
Nella M. Bloom
Lonny S. Cades
James F. Harker
Michael L. Solomon
Mark Stadler
Steven M. Williams

Learn more about the Firm and its services at: http://www.cohenseglias.com/.

     
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