Is a seal required for a real estate deal?
A common question that arises in respect to real estate transactions.
Here is a little bit of history about the use of the seal in the first place. It did not arise out of contract law, so that is one reason why some people have difficulty understanding its use.
“Why are some contracts “sealed” and others are not?
In order to have a contract, you need to have an “agreement” that the Courts will enforce. Not all statements that are made, result in enforceable promises. Remember, all the promises made at election time!
Sometimes, it is necessary to determine which promises should be enforced. Really, there are basically three types of contracts:
• Those that have consideration (something offered, something given up)
• Those under seal (without consideration)
• Those that have consideration and are under seal (the most common type)
The legal seal is evidence that a promise is intended to be a legally enforceable promise. A promise might otherwise simply be a gift. A promise together with consideration is a legally enforceable contract. That premise arose out of the modern law of contracts. When I say “modern” I mean the last 700 to 800 years.
The concept of documents being executed under “seal” preceded modern contract law. Documents executed under seal were considered to be legally binding and enforceable promises.
Seals were used in Babylonia in 3200 BC to identify and authenticate the author and the agreement. Seals were commonly used by nations to settle disputes following war. The red wax seal (symbolizing blood) was used by Caesar. The first usage of seals in modern times was the period immediately following the Norman Conquest in 1066. From that time until 1215, seals were all the rage. They were the equivalent of cellphones. Everyone had a seal. This was your identification and served to indicate that you had the legal capacity to enter into a promise that was legally enforceable. It didn’t have to be a contract. You would be taken as a “man of your word” because you had a seal.
The poorer class, of course, didn’t have seals. They would “prick their right thumbs” with a sharp object to draw blood and impress a document with their thumbprints. Later, Courts would recognize this activity as being the equivalent of executing a document under seal.
By 1215, the modern day usage of seals was introduced to England by the signing of the Magna Charta, often viewed by historians as the first bill of rights, the first constitution and the birth of the common law.
Historically, there was a special class of documents executed under seal. A promissory note was enforceable for 6 years, but a promissory note executed under seal was enforceable for 20 years. In essence, the practice grew out of an ancient system of authenticating documents rather than contract law. So, naturally there are some differences with the rules.
The limitation is usually longer. Basically, why get a promissory note that will only last 6 years, when one under seal will last 20? And, don’t forget that a mortgage is a promissory note.
It became commonplace for everyone to want just about everything executed under seal. All important documents were under seal. That was the way Kings and Queens did business. All deeds were executed under seal. That, of course, is no longer the case, but it was until 1985 in Ontario.
More recently, Courts have begun to erode the special status of documents under seal, by holding many other contracts to this higher standard.
Most standard form legal contracts include the words “signed, sealed and delivered” just above signatory line. You will find that in the standard form agreement of purchase and sale. The black dot is the location for the seal to be affixed. Seals today are small red circular dots with glue on the back. They should be affixed. However, any indication of an intention to execute the document under seal is sufficient. So, if you circle the black dot in ink, that will work and be just as good.
In real estate transactions there are two very good reasons to have documents executed under seal.
First it binds the Buyer/Offeror to the irrevocable time stipulated in the Offer. There’s no consideration since the Offer has not yet been accepted. So, effectively the Buyer/Offeror could withdraw the offer prior to acceptance.
Second, the Spousal Consent will be executed under seal. In this agreement there is no consideration flowing to the Spouse, so the only thing actually binding the Spouse to the deal is the seal. The Spouse is committed to the contract because of the seal,
Brian Madigan LL.B., Broker
www.OntarioRealEstateSource.com