“INSTRUMENT UNDER SEAL” – THESE THREE WORDS REALLY DO MATTER

Ever wonder what an “instrument under seal” is? When the word [SEAL] is placed next to the signature block at the end of the written guaranty or loan agreement, does it have any impact? The answer is a big YES.

Earlier this summer, the Pennsylvania Supreme Court confirmed what we have always told our clients when they have asked us this question. When a written contract states that it is an “instrument under seal” and has the word “SEAL” next to or part of the signature block, the statute of limitations to enforce the terms of the written contract in question has been increased from the standard 4 year limitation period to 20 years!

So what is the important take away here? Review your loan agreements and other agreements (a guaranty for example) to make sure this language is standard on all agreements going forward. Not only does this give you a longer time period to decide if you want to bring legal action for nonperformance, but it also makes your negotiable instruments more marketable should you decide to sell them to third parties.

If you have any questions concerning the commercial agreements your business uses, please feel free to call the attorneys at Danziger Shapiro & Leavitt for a free consultation. We are more than happy to discuss how we can assist you with respect to updating your commercial agreements and any other business issue you care to discuss as well.

This entry is presented for informational purposes only and is not intended to constitute legal advice.

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