Friday, April 15, 2011

Is Your Fate "Sealed" in Delaware?

Have you ever seen the word "Seal" on a signature page to a contract?  Have you ever wondered what that word means?  It turns out it means quite a bit under Delaware law.

Stamping a contract with a corpoate seal means that the contract or instrument is extra official.  Contracts "under seal" can subject to a 20-year common law statute of limitations rather than the typical 3-year statutory limitations period in Delaware.  In the case of an individual, merely writing the word "Seal" next to that person's signature is enough to create a sealed contract under Delware law.  That result came as a bit of a surprise to legal practitioners when the Delaware Supreme Court made that decision in the 2009 case of Whittington v. Dragon Group, L.L.C.

The 3-year statute of limitations, which includes a carve out for records or instruments "under seal," can be found in Title 10 (Court and Judicial Procedures), Section 8106 of the Delaware Code.

Parties to contracts governed by Delaware law would be wise to look for the word "Seal" on the signature page of the contract and understand its far-reaching implications.

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