What is a Separation Agreement?

In North Carolina, a separation agreement is a contract between spouses that specifies the terms they have agreed to for living separate and apart.  The agreement can cover issues such as spousal and child support, child custody, and the division of property without having to have a judge make the decisions for the couple.

What is Required?

If the agreement includes any property, the full legal name of the agreement must be “Separation and Property Settlement.” The agreement must signed and notarized to be valid.  Additionally, while some states require a judge to approve a separation agreement, North Carolina allows separating couples to control the terms of the agreement between themselves, with a few exceptions.

A separation agreement is not a requirement to be considered separated by the court.  As soon as there is physical separation with the intent to live separately and to continue to live separately, a couple is deemed to be separated.

What are the Benefits?

Generally, if a couple can come to an agreement without having to involve the court, things will go much faster and be much less expensive.  If things become impossible to negotiate and the court has to step in, the process can take much longer, be more stressful, expensive and less private than it would have been had the parties been able to work things out in an agreement themselves.  If a judge has to intervene, the parties may not get what they want in the agreement, when they otherwise might have if they had been able to negotiate between themselves.  Couples understand their own needs much better than a judge can.

Is an Attorney Required?

While it isn’t a requirement that you have an attorney involved in the negotiation or drafting process, it is highly recommended, especially if your spouse has an attorney working with them.  An attorney can guide you through the process and help negotiate for things that are important to you as well as protect your and your children’s interests.

Can a Separation Agreement Waive Child Support?

The state will always act in a child’s best interest, so if there are parties who have a separation agreement with child support waived, the courts will not enforce the clauses in the agreement related to such.  It doesn’t matter if the parties agree to a lump sum payment made from one party to the other for the support of the child, there is no way to predict the future needs of the child and the changes that may occur. However, the parties may agree on a certain payment amount for child support each month. So long as the court finds that the amount is reasonable, definite, and in the best interest of the child, the agreement will be enforced.

How Does a Separation Agreement Work with a Divorce Decree?

A separation agreement can remain completely separate from a divorce decree or it can be merged into the decree later in the process of the divorce.  To incorporate the agreement into the decree, the parties must agree to bring the separation agreement to the court and if they fail to do so, it will remain a contract outside of the decree. If the parties submit the agreement to the court, the documents will merge and there will no longer be a separate contract.  The agreement can also be partially merged, so that the agreement is like a contract in some ways and like a court order in other ways.  The court granting the final divorce will not have any effect on the separation agreement unless the agreement states otherwise and the agreement will remain effective after the divorce is final.

What if the Separation Agreement is Violated?

The party seeking to enforce the agreement can bring a lawsuit against the party who violates the agreement.  If the agreement included language that barred support and alimony and the party who was relieved of such payments violates the agreement, the party bringing the claim can rescind the separation agreement and seek support or alimony.

How is the Separation Agreement Enforced?

The agreement will be enforced differently depending on whether it has become part of a court order.  A separation agreement that isn’t part of a court order is treated like any other contract made between parties.  The parties can enforce this contract by showing there is a breach of the contract.  Parties can sue and seek money damages or specific performance.  Specific performance is a court order to make the breaching party do what the separation agreement requires them to do and it can be ordered even before the case goes to trial.  The court may order the parties to attend settlement conferences or settlement negotiations and if refused, the court can impose monetary fines on the offending party.

If the agreement has become part of a court order, the moving party must bring a motion to hold the other party in contempt.

Will a Separation Agreement be Enforced after the Death of a Party?

The death of a party does not automatically end the agreement terms and obligations.  If the agreement does not clearly state what happens if a party dies, the court will go by what it finds the parties intended.  If a parent dies, leaving a child they were paying support for, the deceased’s estate may continue to be required to make the monthly payments under the agreement.

What if the Agreement is From Another State?

North Carolina will usually recognize contracts entered into in other states as long as those contracts are valid.  The laws of the state where the contract was formed are typically the laws the contract is governed by, unless the parties agreed otherwise in the agreement.

What Damages Can be Recovered?

As in other contract cases, the court wants to put the Plaintiff in the same position he or she would have been had the Defendant not breached the agreement.  If the breach concerned missed support payments, the judge may award all overdue payments plus interest.

As mentioned previously, the judge may order specific performance to enforce the terms of the agreement.  This remedy is only available as a contract remedy, not if the agreement has become part of a court order.  If a party refuses to comply with an order of specific performance, they may be held in contempt of court and even jailed until they comply with the order.  To bring a claim for specific performance, the moving party must show that: (1) the moving party’s remedy at law is inadequate (so money damages would not be ok); (2) the other party can perform but chooses not to; and (3) the moving party has performed his or her own obligations under the separation agreement.

Generally, a party cannot claim damages due to mental anguish caused by a breach of contract.  However, the North Carolina Supreme Court has held that there may be recovery if a Plaintiff can prove that: (1) the contract was not concerned with trade or commerce; (2) the contract was not primarily for financial benefit; or (3) the contract related to issues of dignity and emotions, so that there would be a great probability of mental anguish if there was a breach.  While most agreements cannot meet the second and third prongs, there may be damages available if there was a non-molestation clause in the agreement that was breach, causing emotional harm.  A non-molestation clause is included in agreements to prevent the parties from interfering in each other’s lives.  Violations of this type of clause include:  making or sending repeated and unwanted calls, texts, emails, or letters; seeking to have the other party unjustly arrested; filing and withdrawing multiple lawsuits against the other party; complaining to the other party’s employer or colleagues about the other party; intercepting the other party’s mail; or slandering the other party for a long period of time.

Finally, while punitive damages are not usually awarded for breach of contract, in rare cases the court will award punitive damages when it finds that a party intentionally inflicted emotional distress on the other party under a tort theory.  Punitive damages are intended to punish and discourage the Defendant from repeating the bad acts that caused the emotional distress.

Rescission

Under certain circumstances, a party can rescind a separation agreement and start over with a whole new agreement.  The original agreement would thus be void, as if it had never existed in the eyes of the law.  This means, if in the original agreement the parties agreed to no spousal support, the party seeking the rescission can now move to have spousal support ordered by the court.  Parties can also agree if there is a breach, instead of voiding the entire agreement, the rescission only applies to only the section that was violated.

If you decide to file for a rescission, we recommend you also file a claim for equitable distribution and alimony at the same time, before the divorce is final.  If the court orders the rescission as part of the separation agreement after the divorce is final, the divorce will typically end all rights of a spouse to seek equitable distribution or property or alimony.  However, in rare circumstances, courts may allow the spouse to seek support and/or equitable distribution after the divorce is final based on wrongful conduct.  If rescission is granted after the parties have performed some of their obligations specified in the agreement, the court will require them to pay back the benefits they received.  The courts focus on fairness, so that the parties are put in the same position they were before the agreement was signed.

Attorney’s Fees

Attorney’s fees can be recovered if there is a breach of contract if the parties have agreed they will be available under the agreement.  A court may not award attorney’s fees unless they are specifically provided for in the contract.  If the agreement has become part of the court order, if a party brings a motion for contempt, attorney’s fees may be available.

Defending a Claim of Breach of Contract

The Defendant may just argue that they didn’t actually breach the contract or they may argue that the agreement is invalid and should not be enforced.  If a separation agreement has not yet become part of the court order, it will be treated as any other type contract, and all available defenses for a breach of contract are also available for a breach of the separation agreement.

Defenses can either be procedural or substantive.  A procedural defense is based on legal requirements that, if not met, invalidate the agreement.  Mental incapacity, infancy, fraud, constructive fraud, mistake, duress, undue influence, lack of legal formalities and lack of disclosure are all examples of this type of defense.  If a party is successful with a procedural defense, rescission may apply.  A substantive defense is based on the agreement being fundamentally unfair or unconscionable.

Most Common Defenses

Mental Incapacity:  If one of the parties is mentally incapacitated at the time of entering the separation agreement, the agreement may be considered voidable.  To prove that a contract is voidable based on incapacity, the moving party must show that at the time of signing the agreement, they were incapable of understanding the nature and consequences of signing.  The party does not have to show that they were legally insane but the incapacity cannot be based on the party just using poor judgment.

Infancy:  Under the infancy defense, if a person enters into a contract when they have yet to reach the age of majority, the agreement may be voidable.  An infant is defined as a person who is under the age of 18.  North Carolina does allow infants to marry if they are between the ages of 16-18 with the written consent of a parent who has legal custody of the minor or with the consent of another person, agency or institution with legal custody.  District courts in North Carolina may grant a minor between the ages of 14-16 permission to marry if there is a pregnancy, or if the child has already been born and the mother intends to marry the father.  The court may also grant the marriage if the judge determines the minor is capable of assuming the responsibilities of marriage and that marriage is in the best interest of the minor.  No one under the age of 14 may marry in North Carolina.  When a minor decides to divorce and a separation agreement is entered into, that agreement is voidable by the minor up until a reasonable time after he or she reaches the age of majority.  While the law allows for married minors to enter agreements about certain kinds of property and the minor may waive or release rights in property of their spouse, they are not deemed competent to enter into contracts for other types of property or support.

Fraud and Constructive Fraud:  To prove a defense based on fraud, five elements must be met:

  • The party the claim is against made a false representation or concealed a material fact;
  • That representation or concealment was reasonably calculated to deceive;
  • The representation or concealment was made with the intent to deceive;
  • The complaining party was in fact deceived; and
  • The complaining party suffered damages.

To prove a defense based on constructive fraud the complaining party must prove there was a confidential relationship between the parties and one party took advantage of his position of trust.  While a marriage is a confidential relationship, a party can argue that when the parties signed a separation agreement, the marriage was no longer at the level of a confidential relationship because the parties have become adversarial and may not trust each other so much.

Mistake:  If both parties were mistaken about a material fact at the time they signed the separation agreement, a party can rescind the agreement.  A mistake usually is related to the contents or legal effects of the agreement or related documents.

Duress:  Duress is found where one party unlawfully induces another party to enter into a contract under circumstances that deprive the induced party of his free will.  The complaining party must prove the other party threatened him or her and that threat overcame the free will of the complaining party.  A threat can be a threat to physically harm the complaining party or others.  Additionally, a threat will be found if the offending party has made statements in bad faith that they will seek full custody of the children or withhold visitation rights.  The court will use factors such as the physical, mental, emotional, financial and medical condition as well as the age of the complaining party.

Undue Influence:  Undue influence is the unfair persuasion of a party who is under the domination of the person doing the persuading and there is a relationship involving the person persuading that leads the complaining party to believe the persuader will not act against his or her welfare.  While similar to duress, there is no threat required.  To prove undue influence, the complaining party must show that he or she was susceptible to the undue influence based on things like the age, physical and mental condition of the complaining party and whether they had independent advice available.  Additional factors include the value of the property transferred in the relationship to the complaining party’s overall wealth and whether the complaining party was in economic distress or in an emergency situation.

Lack of Disclosure:  Generally, parties to a contract have no obligation to disclose all relevant facts.  However, if there is a confidential relationship between the parties, there is a duty to disclose.  The parties to an agreement involving a confidential relationship should be able to reasonably rely on each other to disclose all material facts.  While a marriage is considered a confidential relationship, when the parties are at the stage of negotiating a separation agreement this relationship may no longer exist.

Unconscionable or Unfair Agreement:  The law can be somewhat ambiguous when defining what constitutes fairness.  Courts have defined procedural unconscionability as “bargaining naughtiness,” “unfair surprise,” or “lack of meaningful choice.” The courts have also defined substantive unconscionability in regards to separation agreements with “harsh, oppressive … one-sided terms,” or terms that “unreasonably favor” one party.  Just a bad bargain or one that is a bit lopsided does not reach the level of unfairness nor unconscionability.  Basically, the inequality of the bargain must shock the conscience of a person of reasonable common sense and the terms of the agreement must be so oppressive that no reasonable person would make or agree to them.

Defenses to a Court Decree

When a separation agreement is incorporated into a court decree, the parties lose their contract defenses defined above.  A party can move to have a decree set aside if the process by which it was issued was defective.