Seal (contract law)

In the history of law, a wax seal affixed to a contract or other legal instrument has had special legal significance at various times in the jurisdictions that recognize it. An instrument with such a seal affixed for this purpose is said to be "under seal" or "sealed" (this usage is different from "sealed records"). In the courts of common law jurisdictions, a "sealed contract" was treated differently from an "unsealed contract", until this practice gradually fell out of favor in most of these jurisdictions in the 19th and early 20th century; the most significant difference was that sealed contracts were enforceable without consideration. This reflects classical contract theory, in which consideration was viewed as a formal aspect of a contract, so that a seal could be considered an alternative form. This view has fallen out of favor in common law courts, but parallel to sealed contracts, similar treatment of special form contracts for donative promises (absent consideration) continues even into the 21st century in the civil law courts of France and Germany.

The legal term "seal" arises from the wax seal, used throughout history for authentication (among other purposes). Originally, only a wax seal was accepted as a seal by the courts, but by the 19th century the definition had been relaxed to include an embossed paper wafer similarly affixed to an instrument, an impression in the paper on which the instrument was printed, a "scroll" made with a pen, or even the printed words "Seal" or "L.S." (for "locus sigilli"). Today, even in common law jurisdictions where the seal has greatly reduced significance, seals are still sometimes used on contracts (usually in the impression on paper form), presumably for symbolic purposes.

History

Until modern statutory reforms in contract law, a seal was widely recognized in common law courts as being able to substitute for consideration in the narrow sense of the term. [The use of seals on documents predates the concept of consideration in modern contract law, so "substitute" here is meant more as a way to understand the significance of a seal in the context of modern contract law than a historical account of how the seal came to have this significance.] A seal was not per se a type of consideration, but rather raised a presumption of consideration (courts have varied in their opinions of whether this presumption was rebuttable). The rationale for this special treatment of sealed contracts can be understood in terms of two aspects of sealing a document with a wax seal:
* The object (usually a signet ring) used to imprint the wax identified its owner, thereby providing (at least some standard of) "proof" that the owner was party to the contract
* The binding effect of the seal was widely understood, providing evidence of "deliberation"This element of deliberation is important in the context of many legal theories for why donative promises are not generally enforceable in the same way as contracts. In particular, it is understood that donative promises are often made under pressure (for example, from family members) without adequate deliberation, which explains why a seal might substitute for consideration to give enforceability to donative promises.

Besides substituting for consideration, other consequences of the seal that at least historically have held include [Fuller, Appendix C] :
* Even payment did not discharge a sealed contract, if the instrument itself was not physically destroyed. [This rule no longer exists in any common law jurisdiction.]
* Fraud was not permitted as a defense to a sealed contract.
* Subsequent modifications to a sealed contract were not binding except where the modifications were also under seal.
* A principal not designated as such in the contract ("undisclosed principal") could not be connected to the contract if it was sealed. [This was one of the last surviving rules giving special significance to sealed contracts in some jurisdictions that had abolished or greatly reduced the significance of seals. The 1925 opinion in Crowley v. Lewis, 239 N.Y. 264, 146 N.E. 374 explains one reason the courts were not eager to dispense with this rule, as "many times the seal must have been used for the express purpose of relieving the undisclosed principal from personal liability".]

In England, the common law courts originally recognized only wax seals. This requirement was gradually relaxed. In the United States, wax seals were never expressly required. Restatement of Contracts, Second notes that

Impressions directly on the paper were recognized early and are still common for notarial and corporate seals, and gummed paper wafers have been widely used. In the absence of statute decisions have divided on the effectiveness of the written or printed word 'seal', the printed initials 'L.S.' (locus sigilli, meaning place of the seal), a scrawl made with a pen (often called a 'scroll') and a recital of sealing. [Restatement, Second, Contracts § 96]

The relaxation of the definition of a "seal" was generally contemporaneous with reduced distinctions given to sealed contracts. This trend can be seen as a parallel of the courts' modern relaxation of their interpretation of the Statute of Frauds, and reflects the evolution of modern contract theory from classical contract theory. In "Basic Contract Law", Fuller and Eisenberg note that "about two-thirds of the [United States] states have now adopted statutory provisions depriving the seal of its binding effect," although several important jurisdictions, such as New Jersey, have retained the concept (see NJSA 2A:14-1, 2A:14-4, 2A:25-1, and most importantly, 2A:82-3).

Cases involving sealed contracts

"Schnell v. Nell" (1861), which is widely cited as an example of nominal consideration, involved a sealed contract. Although the distinction of seal had already been abolished by Indiana statute, it is likely the parties viewed the seal as making the contract enforceable, much as the nominal consideration of $1 would have under classical contract theory.

See also

* Lord Privy Seal

Notes

References

* Fuller, Lon L. and Eisenberg, Melvin Aaron (2001). "Basic Contract Law", Seventh Edition.
* Restatement, Second, Contracts.