Agreements - § 6-11

§ 6-11 Validity

(A) Generally

2015---MacDougal v. Levick, 66 Va. App. 50
The equitable “family settlement doctrine,” which provides for the general rule that agreements to settle internal family strife, which are premised on the supposition of a right, or of a doubtful right, even if afterward it turns out that the right was on the other side, is not applicable in suits for divorce or annulment.

2008---Burke v. Burke, 52 Va. App. 183; 662 S.E.2d 622
Provision in PSA stating that “each party agrees that any matter arising out of this agreement shall be decided by [the Circuit Court judge]…and the decision of that judge shall be final conclusive, and non-appealable and binding” was valid, thus warranting dismissal of Wife’s appeal. The provision did not waive the rights of anyone other than the parties, allowed neutral review of any dispute, and did not violate any Virginia statute. Additionally, public policy does not prevent parties to a PSA from contracting away their right to appellate review of matters addressed therein.

2007---Ericson v. Ericson, 2007 Va. App. Unpublished, 258
Trial court erred in ordering Father to pay Mother a pro rata share of the post-high school educational costs which Mother had paid where the material terms of the provision of the parties’ Property Settlement Agreement relating to payment for their children’s education following high school was found to be vague and unenforceable as a matter of law.

1996---Scroggins v. Scroggins, 1996 Va. App. Unpublished, 207
Trial court did not abuse discretion in setting aside parties’ entire Property Settlement Agreement due to Husband’s failure to disclose the value of several items of intangible personal property, Wife’s impaired judgment at the time the agreement was executed, and Husband’s knowledge and use of Wife’s reliance on Husband’s integrity rather than her own counsel.

(B) Apparent/Authority

2001---Walson v. Walson, 37 Va. App. 208
Trial court erred in finding that wife’s attorney had apparent authority to sign a settlement agreement on wife’s behalf, and therefore erred in finding that wife was subsequently bound by the agreement. “Apparent authority” is that authority which the principal has held the agent out as possessing, or which he has permitted the agent to represent that he possesses, and which the principal is estopped to deny. So far as third persons are concerned, apparent authority is the real authority, and when the third person has ascertained the apparent authority with which the principal has clothed the agent, he is under no obligation to inquire into the agent’s actual authority. Singer Sewing Machine Co. v. Ferrell, 144 Va. 395 (1926).

Here, wife made no verbal or nonverbal representations to either husband or husband’s attorney that would reasonably lead either of them to conclude that wife’s attorney had the authority to sign a settlement agreement on her behalf. Though wife refused to attend settlement negotiations because she did not want to be in the presence of husband, the fact that wife’s attorney left the negotiations every ten minutes to consult wife via telephone regarding offers and counteroffers would have led a reasonable person to believe that wife retained final say over the agreement. Furthermore, prior agreements proposed by wife contained lines for the signatures of the parties only, which clearly manifested to husband and his attorney that wife intended that she, rather than her attorney, would sign any agreement.

(C) Coercion/Duress

2016---Gust v. Gust, Va. Ct. of Appeals, Unpublished, No. 0901-15-2
The trial court did not err in refusing to find that Wife involuntarily entered into the parties’ prenuptial agreement. At trial, the parties presented conflicting testimony regarding the facts and circumstances of their negotiation and execution of the prenuptial agreement. As noted by the trial court, although both parties appeared credible, their conflicting testimony indicated that “somebody was lying.” Consequently, Wife, as the party disputing enforceability of the agreement pursuant to Code of Virginia § 20-151(A)(1), failed to meet her burden to prove that she did not enter into the prenuptial agreement voluntarily.

2014---Woodward v. Woodward, Va. Ct. of Appeals, Unpublished, No. 0159-14-3
The trial court did not err in rejecting Wife’s argument that she was operating under impaired judgment when she signed the postnuptial agreement. The law presumes an adult party that executes an agreement is mentally competent to enter into a contract. The resolution of conflicting evidence regarding a person’s mental capacity is a factual determination made by the trial court. Here, the trial court considered a letter from Wife’s psychologist describing Wife’s psychological condition, but the letter contained no assertion that Wife was incompetent when she signed the agreement. The trial court also heard testimony regarding Wife’s mental and emotional condition at the signing of the agreement, but no one testified that Wife’s mental condition prevented her from signing the agreement.

2012---Wang v. Crumpacker, Va. Ct. of Appeals, Unpublished, No. 1904-11-4 The trial court did not err in finding that wife was not under coercion or duress when executing a pre-marital agreement just because wife’s visa to the U.S. was set to expire. The agreement contained specific language wherein the parties acknowledged that it was being finalized near in time to the parties’ wedding date and the expiration of the wife’s visa, and stated that “notwithstanding these facts, the parties are entering into this Agreement freely and without any duress, coercion, undue influence or overreaching.” Wife’s former counsel, involved in the negotiation of the agreement, testified that he was unaware of any external pressure on wife to sign the agreement, that wife was not actively involved in the negotiation process, and that wife made no indication that she did not understand all provisions of the agreement.

2012--- Poindexter v. Clark, Va. Ct. of Appeals, Unpublished, No. 2286-11-2
Trial court did not err in sustaining wife’s motion to strike husband’s claim that an agreement should not be incorporated because he was under duress when executing it. Husband alleged that his duress was the result of wife threatening to have the parties’ daughter falsely accuse Husband of molesting her unless he signed the agreement. Though husband denied ever molesting the child, he feared that a prior conviction for being a “peeping tom” would affect his credibility with police in the face of such an allegation. However, evidence revealed that husband had in fact negotiated the initial draft of the agreement, and had been successful in procuring changes favorable to him prior to signing the final version. The trial court found he had not met his burden to demonstrate duress.

2012---Wang v. Crumpacker, Va. Ct. of Appeals, Unpublished, No. 1904-11-4
The trial court did not err in finding that wife was not under coercion or duress when executing a pre-marital agreement just because wife’s visa to the U.S. was set to expire. The agreement contained specific language wherein the parties acknowledged that it was being finalized near in time to the parties’ wedding date and the expiration of wife’s visa, and stated that “notwithstanding these facts, the parties are entering into this Agreement freely and without any duress, coercion, undue influence or overreaching.” Wife’s former counsel, involved in the negotiation of the agreement, testified that he was unaware of any external pressure on wife to sign the agreement, that wife was actively involved in the negotiation process, and that wife made no indication that she did not understand all provisions of the agreement.

1989---Derby v. Derby, 8 Va. app. 19
To have an agreement declared invalid on grounds of unconscionability, constructive fraud, or duress, the party contesting the agreement must prove the allegations by clear and convincing evidence.

(D) Competency

2007---Coloccia v. Coloccia, 2007 Va. App. Unpublished, 76
Husband failed to prove by clear and convincing evidence that he was incompetent when he executed the property settlement agreement. Although Husband’s neurologist testified that he had short-term memory problems and difficulty with his thinking, it did not compel the conclusion that he did not comprehend the nature and character of his agreement and the consequences of executing a legal document.

(E) Constructive Fraud/Fraud

1996---Fields v. Fields, Va. Ct. of Appeals, Unpublished, No. 0239-95-3
Wife failed to prove by clear and convincing evidence constructive fraud on part of Husband. Although Husband drafted the parties’ settlement agreement, which did not specifically identify the value of certain retirement assets of the parties, Husband did not refuse to disclose the value of the assets nor misrepresent the value of the assets to Wife. Moreover, the evidence established that Wife had access to all of the financial documents of the parties, that Husband would have disclosed the value of the assets if asked by Wife, and that Husband did not discourage Wife from obtaining independent legal advice regarding the agreement.

1989---Derby v. Derby, 8 Va. app. 19
To have an agreement declared invalid on grounds of unconscionability, constructive fraud, or duress, the party contesting the agreement must prove the allegations by clear and convincing evidence.

“Constructive fraud” is a breach of legal or equitable duty which, irrespective of moral guilt, is declared by law to be fraudulent because of its tendency to deceive others or violate confidence. Thus, to determine fraud, the relationship between the parties and the duties, if any, owed to one another define the standards by which their conduct and transaction will be judged. Although marriage is a confidential relationship of trust imposing the highest fiduciary duty upon spouses in their intermarital dealings, that fiduciary or confidential relationship ends when husband and wife separate and employ attorneys to negotiate an agreement in settlement of their property rights.

Trial court erred in finding that wife committed fraud by approaching husband with a settlement agreement, which wife’s attorney had sent to husband’s attorney but which husband’s attorney had yet to talk with husband about, and having husband execute the agreement under the mistaken impression that doing so would allow him to save his marriage. Although evidence supported the trial court’s finding that husband signed the agreement hoping to save his marriage, the recitals in the agreement which he signed acknowledged that a divorce suit was pending and that the agreement would be ratified, approved, and incorporated into a final order of divorce. Wife did not misrepresent or conceal the terms or effect of the agreement or do any act sufficient to constitute fraud. Wife owed no fiduciary duty to husband, and did not act fraudulently by simply using to her advantage the fact that husband may have been fostering some hope of reconciliation.

(F) Unconscionability

2014---Woodward v. Woodward, Va. Ct. of Appeals, Unpublished, No. 0159-14-3
The trial court did not err in rejecting Wife’s argument that the parties’ postnuptial agreement was unconscionable. Unconscionability is decided by a court as a matter of law. To rescind or void the agreement, Wife bore the burden at trial to prove by clear and convincing evidence that the agreement was unconscionable. That burden required Wife to demonstrate: 1) that a gross disparity existed in the agreement’s division of the parties’ assets; and 2) the presence of overreaching or oppressive influences. Historically a bargain was unconscionable if it was one that “no man in his senses and not under delusion would make on the one hand, and no honest and fair man would accept on the other.” Further, recitations in a marital agreement create a prima facie presumption that they are factually correct. A person is legally free to make a bad bargain or agree to make a partial gift of property. Thus, if price inadequacy or value inequality are the only indicia of unconscionability, the case must be extreme to justify equitable relief. Here, the agreement’s recitations that the agreement was “fair, equitable, and not unconscionable” created the presumption that the agreement was not unconscionable. Moreover, the agreement distributed several parcels of real estate to Wife and provided her with a $100,000.00 payment from Husband. Thus, even if the agreement distributed more property to Husband than Wife, the agreement’s property distribution was not so gross as to shock the conscience.

2013---Guirguis v. Salib, Va. Ct. of Appeals, Unpublished, No. 0038-12-1
The trial court erred in finding unconscionable a settlement agreement which Husband signed, upon the advice of the parties’ priest, with the belief that doing so would facilitate reconciliation. The agreement contained an express “disavowal” by each party of any claim of unconscionability, which, pursuant to Va. Code §20-151(B) entitled Wife to the presumption that the agreement was not unconscionable. Moreover, the fact that Husband signed the agreement upon assurances by the parties’ priest that Wife would not use the agreement against him did not constitute evidence of overreaching by Wife. Wife never misrepresented her intentions regarding reconciliation, and the record clearly established that Wife required Husband’s signature on the agreement as a precondition to any reconciliation attempt. Husband had ample opportunity to seek legal counsel, but chose not to do so. Moreover, Husband failed to prove that the agreement created a “pecuniary necessity” by leaving him no means to support himself. Though the agreement required Husband to pay to Wife $10,000 per month from just $12,000 in monthly net pay, Husband was a licensed physician, had substantial education and no physical disability, and earned a significant annual salary. Though Husband was arguably unwise in signing the agreement, his doing so did not permanently foreclose his capacity to support himself.

2012---Wang v. Crumpacker, Va. Ct. of Appeals, Unpublished, No. 1904-11-4
The trial court did not err in finding a pre-marital agreement valid, and not unconscionable, despite wife’s waiving spousal support and interest in husband’s pre-marital pension in the agreement even though she was unemployed at the time of execution. Wife benefited from the agreement by agreeing to waive certain rights in return for the prompt wedding she received, and an opportunity to obtain a permanent visa. Moreover, the agreement merely retained to the parties the property they had when they came into the marriage.

2011---Pramagioulis v. Pramagioulis, Va. Ct. of Appeals, Unpublished, No. 1437-10-2
Trial court did not err in rescinding a settlement agreement wherein wife received none of the marital property and waived spousal support. Wife suffered from numerous mental health issues that, according to the testimony of her counselor, made her easily influenced by others. Wife was on permanent disability, unable to work full time, and had only a ninth-grade education. Wife had no independent counsel, was not provided an itemized list of assets and debts, and relied on promises by husband and his attorney that husband would continue to support her, despite an express waiver of spousal support in the agreement. The signing of the agreement resulted in a gross disparity of the division of assets, and was predicated upon overreaching influences by husband.
Statement in parties’ settlement agreement that “each party assures the other that full disclosure has been made to the other of any assets he or she has any interest in...” did not constitute a waiver by wife to a full disclosure of property pursuant to Va. Code §20-151.

2011--- Chaplain v. Chaplain, Va. Ct. of Appeals, Rec. No. 1301-10-1
Pursuant to Va. Code §20-151(B), language in the parties’ settlement agreement stating that “each party warrants, represents, covenants and guarantees…that this agreement is not unconscionable” created a presumption that the agreement was not unconscionable and put upon wife, who sought to void the agreement, the burden of proving by clear and convincing evidence of unconscionability.

The trial court did not err in finding the parties’ pre-marital agreement conscionable, as wife’s evidence failed to satisfy either prong of the Derby test. Wife was capable of understanding and reading English, had worked as secretary to the owner of a successful construction company in Morocco for eighteen years, was college educated, and had had ample opportunity to review the agreement and to discuss it with independent counsel prior to signing. Moreover, despite Wife’s testimony in circuit court to the contrary, she had stated to husband prior to signing the agreement that her assets in Morocco likely exceeded husband’s assets.

2009---Sims v. Sims, Va. Ct. of Appeals, Rec. No. 3101-08-2
In a typical case alleging unconscionability of a marital agreement, the court must consider (1) whether a gross disparity existed in the division of the assets, and (2) whether the evidence shows overreaching or oppressive influences. Proof of "overreaching or oppressive influences" may be established in either of two ways: when the accompanying incidents are inequitable and show (a) bad faith, such as concealments, misrepresentations, undue advantage, or oppression on the part of the one who obtains the benefit, or (b) ignorance, weakness of mind, sickness, old age, incapacity, pecuniary necessities, and the like, on the part of the other. Proof of "pecuniary necessities" and infirmity satisfies the second prong of the unconscionability test without the need for separate proof of overtly "oppressive influences."

Trial court erred in finding that settlement agreement in which wife relinquished almost 100% of the marital estate and waived spousal support, leaving her unable to support herself without public assistance, was unconscionable, despite a lack of any overt overreaching or oppressive conduct by husband. Undisputed evidence established that wife had a third grade education and numerous health problems, was receiving food stamps, and was capable of only limited employment outside of the home due to her lack of education and her health problems. The agreement left her penniless, and unable to support herself, which, coupled with her infirmity and the gross disparity in the division of the assets, was sufficient to establish unconscionability.

2009--- Chaplain v. Chaplain, Va. Ct. of Appeals, Rec. No. 2582-08-1
Courts must apply a two-step test in determining whether an agreement is unconscionable: 1) a gross disparity in the division of assets must have existed, and 2) overreaching or oppressive influences must have been present, (citing Galloway v. Galloway, 47 Va. App. 83 (2005)).

Trial court erred in granting husband’s motion to strike because wife met her burden to make a prima facie showing of the unconscionability of a premarital agreement. Under the terms of the agreement, husband would receive his entire net worth of approximately $20,000,000, and wife would receive only $100,000 if she and husband were still married and living together at husband’s death. Wife had no source of income, having left her job in Morocco when she married husband, and remained unemployed in the U.S. during the marriage. Furthermore, wife testified she had limited knowledge of English at the time she executed the agreement, that she did not and could not read the agreement, and that the document was handed to her in husband’s attorney’s office, opened to the signature page. Husband did not discuss or explain the terms of the agreement, instead stating that it was a “marriage paper.” Husband did not provide a copy of the agreement to wife, either before or after she signed it, and wife was not represented by counsel when the document was executed.

Pursuant to Virginia Code § 20-151(A), a premarital agreement is not enforceable if, in addition to being found unconscionable when it was executed, the individual challenging its enforceability establishes either (1) that he/she did not execute the agreement voluntarily, or (2) that he/she was not provided a fair and reasonable disclosure of the property or financial obligations of the other party, and did not voluntarily and expressly waive, in writing and before the execution of the agreement, any right to disclosure of the property.

2009---Bailey v. Bailey, Va. Court of Appeals, Record No. 2057-08-1
A contracting party is competent if, at the time he executes an agreement, he has sufficient mental capacity to understand the nature of the transaction and agree to its provisions. (citing Jones v. Peacock, 267 Va. 16, 591 S.E.2d 83 (2004)). While a contracting party must understand the nature and consequences of entering into the agreement, the law does not require that one have the ability to make a reasoned judgment concerning it. (citing Drewry v. Drewry, 8 Va. App. 460, 383 S.E.2d 12 (1989)).

The trial court did not err in holding a marital agreement unenforceable when evidence revealed that Husband signed the agreement while on a weekend furlough from the psychiatric ward of a hospital, that Husband had a long history of chronic and severe schizoaffective psychosis, experienced hallucinations, and was totally disabled.

2006---Barr v. Barr, 2006 Va. App. Unpublished, 536
Trial court did not err in finding that parties’ separation agreement was not unconscionable where Wife failed to provide clear and convincing evidence that there was a gross disparity of the agreed-upon asset distribution. Moreover, the contextual whole of the agreement did not provide the kind of textual clarity necessary for Wife’s assertion that the plain meaning of the debt-and-expenses provision unambiguously created an indefinite duration.

2005---Galloway v. Galloway, 47 Va. App. 83
To determine whether an agreement is unconscionable, a court must examine “adequacy of price” or “quality of value.” If a gross disparity in the value exchanged exists, then the court should consider whether oppressive influences affected the agreement to the extent that the process was unfair and the terms of the resulting agreement unconscionable, (citing Derby v. Derby, 8 Va. App. 19 (1989)). Thus, Derby sets forth a two-part test for determining unconscionability: Appellant must prove both 1) a gross disparity in the division of assets, and 2) overreaching or oppressive influences. Courts must view the apparent inequity in light of other attendant circumstances to determine whether the agreement is unconscionable and should be declared invalid. However, gross disparity alone is not sufficient to find unconscionability, as “every person is entitled to dispose of his property in such a manner and upon such terms he chooses, and whether his bargains are wise, or discreet, or profitable, or unprofitable, or otherwise, are considerations not for courts of justice but for the party himself to deliberate upon.

2004---Ahmed v. Ahmed, Va. Ct. of Appeals, Unpublished, No. 0256-04-3
Trial court did not err in finding parties’ marital agreement to be valid and not unconscionable, despite wife’s receipt of 70% of the marital estate pursuant to the agreement. Record revealed that the agreement was negotiated between the parties for several months, while both parties were represented by counsel, that husband’s counsel was present when husband signed the agreement, that husband was experienced with managing his wealth, was aware of the extent of his wealth, was counseled during the negotiation of the agreement, understood its terms, and voluntarily executed it. Furthermore, husband filed a bill of complaint after the parties’ failed reconciliation attempt, in which he acknowledged the execution of the agreement and its previous incorporation into a consent order, and further asked that the agreement be implemented to the extent not previously implemented by the parties.

1997---Pelfrey v. Pelfrey, 25 Va. App. 239
Property Settlement Agreement was not unconscionable, and Husband’s execution of the agreement was not a product of duress.

1989---Derby v. Derby, 8 Va. app. 19
To have an agreement declared invalid on grounds of unconscionability, constructive fraud, or duress, the party contesting the agreement must prove the allegations by clear and convincing evidence.

If inadequacy of price or inequality in value are the only indicia of unconscionability, the case must be extreme to justify equitable relief. A person may legally agree to make a partial gift of his or her property or may legally make a bad bargain…but gross disparity in value exchanged is a significant factor in determining whether oppressive influences affected the agreement to the extent that the process was unfair and the terms of the resultant agreement unconscionable. When the accompanying incidents are inequitable and show bad faith, such as concealments, misrepresentations, undue advantage, oppression on the part of the one who obtains the benefit, or ignorance, weakness of mind, sickness, old age, incapacity, pecuniary necessities, and the like, on the part of the other, these circumstances, combined with inadequacy of price, may easily induce a court to grant relief, defensive or affirmative.

Trial court did not err in finding agreement unconscionable based on the following: the agreement gave wife essentially everything husband had earned and accumulated in his lifetime for an ephemeral promise by wife to allow him to rent one of the apartments in a building that he gave to her pursuant to the agreement; the agreement retained wife’s reservation of spousal support while husband waived his right to the same; and evidence that wife played on husband’s anticipation of reconciliation and misrepresented her intentions about returning to the marriage by stating to husband that she just “needed some space,” rather than informing him that she sought divorce for purposes of carrying on a relationship with her paramour. Furthermore, neither party was represented by counsel during the “final negotiations,” as wife induced husband to sign the agreement knowing that he had not yet had the opportunity to review it with his lawyer.

(G) Disclosure

2011--- Makoui v. Makoui, Va. Ct. of Appeals, Unpublished, No. 0672-11-3
The trial court did not err in refusing to set aside a pre-marital agreement based on wife’s allegations of insufficient disclosure pursuant to Va. Code §20-151(A). The pre-marital agreement had exhibits identifying husband’s various stock holdings by company name and number of shares. Though some of the stocks listed did not have corresponding fair market values listed, the statute only requires that the disclosure be “fair and reasonable,” not that it include a present fair market value for each item of property disclosed. Husband’s disclosure satisfied that standard.

(H) Oral Agreements

2011---Brock v. Brock, Va. Ct. of Appeals, Unpublished, No. 1353-10-3
The trial court did not err in finding that the execution of the parties’ oral agreement to liquidate an account and divide the funds equally transmuted the funds from marital to separate property.

1976---T. v. T, 216 Va. 867
An express oral contract to assume obligations, including child support, of a biological father existed where, prior to the marriage, husband promised to wife, who was then pregnant with another man’s child, that he would care for the child as if it were his own if she married him. Wife’s marrying husband in reliance on his promise, and husband’s actually treating the child as if it were his own for four years subsequent to the child’s birth constituted part performance on the contract, rendering the statute of frauds inapplicable. Moreover, husband was equitably estopped from pleading the statute of frauds because, in reliance on his promise, wife changed her original, pre-marital plans to move and place the child for adoption, acted to her detriment, and performed her obligations under the agreement.

(I) Contrary to Public Policy

2016 --- Allen v. Allen, 66 Va. App. 586
Virginia follows the general rule in this country that forbearance on bringing or prosecuting a suit for divorce is recognized as valid consideration supporting a contract. The public policy supporting the general rule is that these agreements tend to promote and stabilize the marriage relationship. Accordingly, Husband’s decision in the parties’ postnuptial agreement to forbear his right to pursue a divorce from Wife for a period of twenty years did not contravene public policy.

2012---Layne v. Layne, Va. Ct. of Appeals, No. 2175-11-3
The trial court erred in refusing to allow a mother to reinstate a divorce case for purposes of seeking visitation, based on a statement in the parties’ settlement agreement that the mother relinquished her parental rights. Although the trial court previously incorporated the parties’ agreement in whole, an agreement by the parties to terminate the mother’s parental rights was void as against public policy, and the divorce order incorporating such agreement was likewise void.


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