Instruments Under Seal: Those Words Really Can Make a Difference!
We often are asked why, in Pennsylvania, certain documents are executed as an “instrument under seal” and the signature line includes the following at the end: [SEAL]. On May 28, 2013, the Supreme Court of Pennsylvania, in Osprey Portfolio, LLC v. Izett, validated our customary answer to that question.
In Osprey, the Court held that a guaranty, which stated that it was an “instrument under seal” with the designation (SEAL) as part of the signature line, was entitled to the benefit of a 20 year statute of limitations, rather than the four year statute of limitations applicable to contracts generally. The Court upheld a creditor's suit against a guarantor which was filed after the four year statute of limitations period expired. The Court rejected the guarantor’s argument that a guaranty was not an instrument for purposes of Section 5529(b)(1) of the Judicial Code of Pennsylvania by relying on how the term “instrument” is ordinarily used in a legal context.
This decision is a valuable reminder to include the appropriate “seal” language in loan documents and other contracts, at least until June 27, 2018, when the 20 year statute of limitations for instruments under seal expires by its terms. Requiring instruments to be under seal, especially financing documents, also enhances the marketability of credit facilities which are often sold before enforcement actions are commenced, and more than 4 years after the credits went into default.