Seal (contract law)
Encyclopedia
In the law
, a seal affixed to a contract
or other legal instrument
has had special legal significance at various times in the jurisdictions that recognise it. In the courts of common law
jurisdictions, a contract which was sealed ("made under seal") was treated differently from other written contracts (which were "made under hand"), although this practice gradually fell out of favour in most of these jurisdictions in the 19th and early 20th century. 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 many jurisdictions had relaxed the definition to include an impression in the paper on which the instrument was printed, an embossed paper wafer affixed to an instrument, a scroll
made with a pen, or the printed words "Seal" or "L.S." (standing for the Latin
term locus sigilli meaning "place of the seal").
Notwithstanding their reduced significance, seals are still sometimes used on contracts, usually in the impression on paper form.
reforms in contract law, a seal was widely recognised by courts in common law
jurisdictions as removing the need for consideration
(value) in a contract. 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. 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
). See, e.g., Marine Contractors Co. Inc. v. Hurley, 365 Mass. 280, 285-86 (1974).
The rationale for this special treatment of sealed contracts can be understood in terms of the legal formalities that are associated with sealing a document with a wax seal. Firstly, the following of the legal formality of affixing a seal to a document was evidence of the existence of a contract. Secondly, the need to use a seal – widely known to have legal significance – served to impress upon the parties the significance of the agreement being made. 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: there is a concern that donative promises are sometimes made under pressure (for example, from family members) without adequate deliberation, which explains why a requirement for the legal formality of the seal might substitute for consideration to give enforceability to donative promises. Thirdly, the following of the legal formalities through the use of a seal demonstrated beyond doubt that a legal transaction was intended by the parties.
In addition to these three abstract reasons, there may also have been a more practical reason, namely that the object used to imprint the wax, usually an engraved signet ring, identified its owner, thereby providing evidence that the owner of the seal was party to the contract.
Besides substituting for consideration, other consequences of the seal that, at least historically, have held include:
, the common law courts originally recognised only wax seals, but this requirement was gradually relaxed. By the 20th century a small circle of red adhesive paper affixed to the document in question was sufficient when an individual had to use a seal (most commonly on a contract for the sale of land), although the courts also held that a circle containing the letters "L.S." was adequate.
The common law
rule which required that a deed made by a private individual had to be sealed to be validly executed was finally abolished in 1989 by the Law of Property (Miscellaneous Provisions) Act 1989
. The Act implemented recommendations made by the Law Commission of England and Wales
in their 1987 report Deeds and Escrows and replaced seals with the requirements that the document had to explicitly state that it was being executed as a deed, and had to be witness
ed.
With regard to companies
and other corporate bodies, the common law originally required that all contracts made by such a body had to be made under seal, whether they were deeds or not. This rule was gradually eroded away, for example being abolished in respect of companies by the Companies Acts in the first half of the twentieth century, but until 1960 remained in force for other corporations. It was abolished by the Corporate Bodies' Contracts Act 1960. Normal contracts (i.e. not deeds) can now be made by a corporation in the same way as they can be made by an individual.
The Companies Act 1989 removed the requirement for a company to have a common seal at all, and made provision for those documents which had previously needed to be executed under seal, such as deeds, to instead be executed by officers of the company. However companies can still have and continue to use seals to execute deeds if they wish, in which case the seal has to be engraved (i.e., a seal which leaves an impression on the page, not printed or a wafer facsimile) and to bear the name of the company.
Some other corporations (which are not companies registered under the Companies Acts) are still required to have and use seals. For example, the Royal Charter
incorporating the Royal College of Nursing
requires the College to have a common seal, as does that of the BBC.
Also, the changes relating to deeds which were introduced in 1989 do not apply to corporations sole
such as Government Ministers
or bishops of the Church of England
. Therefore, where a corporation sole has to execute a deed, it continues to have to do so by the use of an official seal.
, wax seals were never expressly required. The Restatement of Contracts (Second) notes that
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. It has been noted that "about two-thirds of the [US] states have now adopted statutory provisions depriving the seal of its binding effect," although several important jurisdictions, such as New Jersey and Wisconsin, have retained the concept.
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.
Law
Law is a system of rules and guidelines which are enforced through social institutions to govern behavior, wherever possible. It shapes politics, economics and society in numerous ways and serves as a social mediator of relations between people. Contract law regulates everything from buying a bus...
, a seal affixed to a contract
Contract
A contract is an agreement entered into by two parties or more with the intention of creating a legal obligation, which may have elements in writing. Contracts can be made orally. The remedy for breach of contract can be "damages" or compensation of money. In equity, the remedy can be specific...
or other legal instrument
Legal instrument
Legal instrument is a legal term of art that is used for any formally executed written document that can be formally attributed to its author, records and formally expresses a legally enforceable act, process, or contractual duty, obligation, or right, and therefore evidences that act, process, or...
has had special legal significance at various times in the jurisdictions that recognise it. In the courts of common law
Common law
Common law is law developed by judges through decisions of courts and similar tribunals rather than through legislative statutes or executive branch action...
jurisdictions, a contract which was sealed ("made under seal") was treated differently from other written contracts (which were "made under hand"), although this practice gradually fell out of favour in most of these jurisdictions in the 19th and early 20th century. The legal term seal arises from the wax seal
Seal (device)
A seal can be a figure impressed in wax, clay, or some other medium, or embossed on paper, with the purpose of authenticating a document ; but the term can also mean the device for making such impressions, being essentially a mould with the mirror image of the design carved in sunken- relief or...
used throughout history for authentication
Authentication
Authentication is the act of confirming the truth of an attribute of a datum or entity...
(among other purposes).
Originally, only a wax seal was accepted as a seal by the courts, but by the 19th century many jurisdictions had relaxed the definition to include an impression in the paper on which the instrument was printed, an embossed paper wafer affixed to an instrument, a scroll
Scrollwork
Scrollwork is an element of ornamentation and graphic design using a spiral. The name comes from by the supposed resemblance to the edge-on view of a rolled parchment scroll. "Scrollwork" is today mostly used in popular language for two-dimensional decorative flourishes and arabesques of all...
made with a pen, or the printed words "Seal" or "L.S." (standing for the Latin
Latin
Latin is an Italic language originally spoken in Latium and Ancient Rome. It, along with most European languages, is a descendant of the ancient Proto-Indo-European language. Although it is considered a dead language, a number of scholars and members of the Christian clergy speak it fluently, and...
term locus sigilli meaning "place of the seal").
Notwithstanding their reduced significance, seals are still sometimes used on contracts, usually in the impression on paper form.
Legal significance in contract law
Until modern statutoryStatute
A statute is a formal written enactment of a legislative authority that governs a state, city, or county. Typically, statutes command or prohibit something, or declare policy. The word is often used to distinguish law made by legislative bodies from case law, decided by courts, and regulations...
reforms in contract law, a seal was widely recognised by courts in common law
Common law
Common law is law developed by judges through decisions of courts and similar tribunals rather than through legislative statutes or executive branch action...
jurisdictions as removing the need for consideration
Consideration
Consideration is the central concept in the common law of contracts and is required, in most cases, for a contract to be enforceable. Consideration is the price one pays for another's promise. It can take a number of forms: money, property, a promise, the doing of an act, or even refraining from...
(value) in a contract. 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. A seal was not per se a type of consideration, but rather raised a presumption
Conclusive presumption
A conclusive presumption is a type of presumption used in several legal systems.-England and Wales:...
of consideration (courts have varied in their opinions of whether this presumption was rebuttable
Rebuttable presumption
Both in common law and in civil law, a rebuttable presumption is an assumption made by a court, one that is taken to be true unless someone comes forward to contest it and prove otherwise. For example, a defendant in a criminal case is presumed innocent until proved guilty...
). See, e.g., Marine Contractors Co. Inc. v. Hurley, 365 Mass. 280, 285-86 (1974).
The rationale for this special treatment of sealed contracts can be understood in terms of the legal formalities that are associated with sealing a document with a wax seal. Firstly, the following of the legal formality of affixing a seal to a document was evidence of the existence of a contract. Secondly, the need to use a seal – widely known to have legal significance – served to impress upon the parties the significance of the agreement being made. 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: there is a concern that donative promises are sometimes made under pressure (for example, from family members) without adequate deliberation, which explains why a requirement for the legal formality of the seal might substitute for consideration to give enforceability to donative promises. Thirdly, the following of the legal formalities through the use of a seal demonstrated beyond doubt that a legal transaction was intended by the parties.
In addition to these three abstract reasons, there may also have been a more practical reason, namely that the object used to imprint the wax, usually an engraved signet ring, identified its owner, thereby providing evidence that the owner of the seal was party to the contract.
Besides substituting for consideration, other consequences of the seal that, at least historically, have held include:
- even payment did not discharge a sealed contract, if the instrument itself was not physically destroyed.
- fraudFraudIn criminal law, a fraud is an intentional deception made for personal gain or to damage another individual; the related adjective is fraudulent. The specific legal definition varies by legal jurisdiction. Fraud is a crime, and also a civil law violation...
was not permitted as a defence to a sealed contract - subsequent modifications to a sealed contract were not binding except where the modifications were also under seal.
- a principalPrincipal (law)In commercial law, a principal is a person, legal or natural, who authorizes an agent to act to create one or more legal relationships with a third party...
not designated as such in the contract (undisclosed principal) could not be connected to the contract if it was sealed.
England and Wales
In England and WalesEngland and Wales
England and Wales is a jurisdiction within the United Kingdom. It consists of England and Wales, two of the four countries of the United Kingdom...
, the common law courts originally recognised only wax seals, but this requirement was gradually relaxed. By the 20th century a small circle of red adhesive paper affixed to the document in question was sufficient when an individual had to use a seal (most commonly on a contract for the sale of land), although the courts also held that a circle containing the letters "L.S." was adequate.
The common law
Common law
Common law is law developed by judges through decisions of courts and similar tribunals rather than through legislative statutes or executive branch action...
rule which required that a deed made by a private individual had to be sealed to be validly executed was finally abolished in 1989 by the Law of Property (Miscellaneous Provisions) Act 1989
Law of Property (Miscellaneous Provisions) Act 1989
The Law of Property Act 1989 is a United Kingdom Act of Parliament, which lays down a number of important provisions for English property law....
. The Act implemented recommendations made by the Law Commission of England and Wales
Law Commission (England and Wales)
In England and Wales the Law Commission is an independent body set up by Parliament by the Law Commissions Act 1965 in 1965 to keep the law of England and Wales under review and to recommend reforms. The organisation is headed by a Chairman and four Law Commissioners...
in their 1987 report Deeds and Escrows and replaced seals with the requirements that the document had to explicitly state that it was being executed as a deed, and had to be witness
Witness
A witness is someone who has firsthand knowledge about an event, or in the criminal justice systems usually a crime, through his or her senses and can help certify important considerations about the crime or event. A witness who has seen the event first hand is known as an eyewitness...
ed.
With regard to companies
Company
A company is a form of business organization. It is an association or collection of individual real persons and/or other companies, who each provide some form of capital. This group has a common purpose or focus and an aim of gaining profits. This collection, group or association of persons can be...
and other corporate bodies, the common law originally required that all contracts made by such a body had to be made under seal, whether they were deeds or not. This rule was gradually eroded away, for example being abolished in respect of companies by the Companies Acts in the first half of the twentieth century, but until 1960 remained in force for other corporations. It was abolished by the Corporate Bodies' Contracts Act 1960. Normal contracts (i.e. not deeds) can now be made by a corporation in the same way as they can be made by an individual.
The Companies Act 1989 removed the requirement for a company to have a common seal at all, and made provision for those documents which had previously needed to be executed under seal, such as deeds, to instead be executed by officers of the company. However companies can still have and continue to use seals to execute deeds if they wish, in which case the seal has to be engraved (i.e., a seal which leaves an impression on the page, not printed or a wafer facsimile) and to bear the name of the company.
Some other corporations (which are not companies registered under the Companies Acts) are still required to have and use seals. For example, the Royal Charter
Royal Charter
A royal charter is a formal document issued by a monarch as letters patent, granting a right or power to an individual or a body corporate. They were, and are still, used to establish significant organizations such as cities or universities. Charters should be distinguished from warrants and...
incorporating the Royal College of Nursing
Royal College of Nursing
The Royal College of Nursing is a union membership organisation with over 395,000 members in the United Kingdom. It was founded in 1916, receiving its Royal Charter in 1928, Queen Elizabeth II is the patron...
requires the College to have a common seal, as does that of the BBC.
Also, the changes relating to deeds which were introduced in 1989 do not apply to corporations sole
Corporation sole
A corporation sole is a legal entity consisting of a single incorporated office, occupied by a single man or woman. This allows a corporation to pass vertically in time from one office holder to the next successor-in-office, giving the position legal continuity with each subsequent office...
such as Government Ministers
Minister (government)
A minister is a politician who holds significant public office in a national or regional government. Senior ministers are members of the cabinet....
or bishops of the Church of England
Church of England
The Church of England is the officially established Christian church in England and the Mother Church of the worldwide Anglican Communion. The church considers itself within the tradition of Western Christianity and dates its formal establishment principally to the mission to England by St...
. Therefore, where a corporation sole has to execute a deed, it continues to have to do so by the use of an official seal.
United States
In the United StatesUnited States
The United States of America is a federal constitutional republic comprising fifty states and a federal district...
, wax seals were never expressly required. The 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.' ..., a scrawl made with a pen (often called a 'scroll') and a recital of sealing.
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
Statute of frauds
The statute of frauds refers to the requirement that certain kinds of contracts be memorialized in a signed writing with sufficient content to evidence the contract....
, and reflects the evolution of modern contract theory from classical contract theory. It has been noted that "about two-thirds of the [US] states have now adopted statutory provisions depriving the seal of its binding effect," although several important jurisdictions, such as New Jersey and Wisconsin, have retained the concept.
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
Indiana
Indiana is a US state, admitted to the United States as the 19th on December 11, 1816. It is located in the Midwestern United States and Great Lakes Region. With 6,483,802 residents, the state is ranked 15th in population and 16th in population density. Indiana is ranked 38th in land area and is...
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.