By Lloyd Skinner

Should you and your partner make an oral agreement regarding the separation of your property it is important to recognise how the family court regards informal agreements if your matter is litigated.

Oral agreements are not legally binding, but if there is a verifiable arrangement covering the distribution of assets will it have any weight or enforceability in a court?

The recent matter of Landry & Talford [1] heard in the Federal Circuit Court of Australia, demonstrates how oral agreements are upheld in litigation.

After 34 years of marriage, the relationship ended when the husband advised the wife that he wanted to separate. In the husband’s trial affidavit, he maintained that ‘three oral agreements’ existed that were devised between the husband and wife to cover the separation of property.

The alleged agreements covered:

  1. The matrimonial home – where the wife agreed to accept a larger share of the sale as a contribution to any further property settlements.
  2. The Talford Property Trust – where the wife consents the acceptance of monthly distributions payments from the trust in lieu of any claim onto the Trust.
  3. The Husband’s Business – the wife accepts the husband’s receipt of the business.

The certainty of the terms of the agreement, however, is not clarified as the wife disputes the existence of such an agreement.

The authority of informal oral property settlement agreements in court are subject to a range of variables that inform the court’s decision.

In this case, the court found ‘internal inconsistencies’ in the husband’s trial affidavit detailing the oral agreements, which failed to demonstrate a concluded agreement ‘as a contribution to any future property settlement.’ Additionally, the court found that based on the husband’s poor memory, the agreement’s informality and lack of documentation surrounding the arrangement, the evidence for the oral agreement was insufficient.

“[T]he husband does not actually remember what was said. There is no contemporaneous document of sufficient clarity to assist the husband’s argument.”

This case represents the problems of oral agreements in family law litigation. They can be subject to opinion and cognitive bias, poorly documented, and informal, which means they are unlikely to be upheld in court in comparison to binding financial agreements.

However, if written evidence exists or there is a third-party witness that demonstrates the agreement complies with the essential elements of a contract, it may hold weight in litigation.

Even so, oral agreements should be avoided. If a dispute develops, the prospect of the agreement holding credence in a trial is insignificant comparable to legally binding, written agreements. Additionally, In the Landry & Talford case, the judge held that even if an oral agreement could be proven, its terms will not be given effect unless just and equitable at the time of hearing.

If you require assistance in developing a property settlement agreement between you and your partner, contact our specialist family lawyers now for no obligation 15-minute consultation on (03) 9995 9155.

[1] Landry & Talford [2020] FCCA 3442 (17 December 2020)