Seal the Deal?

This post could be filed under “Strange Corporate Laws”. This one came up in a recent Delaware Supreme Court case entitled Whittington v. Dragon Group, L.L.C.

The general statute of limitations for contract disputes in Delaware is 3 years. However, if the contract in question is “sealed”, then the statute of limitations is 20 years. Not much has to happen for a contract to be “sealed” — for an individual, the court ruled, all it takes is for the word “seal” to appear next to the signature. Those four letters, usually glanced over quickly (if at all) in the signing process, extended the statute of limitations by 17 years.

I am philosophically (and practically) opposed to situations where small, unintended differences result in large, unintended consequences. Four letters, 17 years, is such a situation. Similar differences apply in many other states as well.

The lessons:

  • Every word in a contract matters. Therefore, nitpicking sometimes matters.
  • The governing law in a contract matters.
  • Contractual obligations may be explicit (written expressly in the contract) or implicit (applied by statute or case law, where not covered expressly).
  • Careful legal negotiation takes into account all of the above.