When couples start the divorce process, agreeing the division of assets is often at the forefront of both parties’ minds.
However, people often don’t realise that an agreement may be reached much sooner. That leaves the question, at what point does an agreement become binding?
In her first article for the firm, Family Law Specialist Megan Spicer outlines when a financial agreement may become final and binding.
When does a financial agreement become binding?
Usually, a financial agreement is not considered final and binding until it is formally agreed upon in writing by both parties and approved by the court through a financial consent order.
However, as a result of the case of Xydhias v Xydhias it is possible that an agreement will become final before the above steps have taken place.
What is a Xydhias agreement?
Where parties agree an informal financial agreement before a financial order is made, they may be bound to the terms of that agreement. This is called a ‘Xydhias agreement’ which was established within the family law case of Xydhias v Xydhias.
What happened in the Xydhias v Xydhias case?
In short, the wife asked the court to vacate the final hearing because both sides had agreed the main terms of a settlement. The agreement had been reached through negotiations between the parties’ lawyers.
However, the husband later changed his mind and withdrew from the agreement. As a result, the wife asked the court to require the husband to explain why the court should not make an order based on the terms that had already been agreed.
The Court upheld the agreement in order to avoid unnecessary litigation and considered that parties should be held to agreements reached where the terms had been substantively agreed.
How does this affect you?
This case set a precedent in family law which is now applied to succeeding cases.
The fact that correspondence had been exchanged between solicitors and an application had been made by the wife to vacate the hearing based on an agreement having been reached was considered strong evidence of a concluded agreement.
What should I do if I want to withdraw from a Xydhias agreement?
There are times where you may wish to withdraw from a financial agreement.
The reason you wish to do this could be that the other party materially failed to disclose all their finances (for example, a large inheritance or a large pension pot), or that they no longer consider the deal reached to be fair.
Is it possible to withdraw from a Xydhias agreement?
Whilst it may be possible to re-negotiate outside of Court, withdrawing from a financial agreement may not always be straightforward and often depends upon how far negotiations have reached. For instance, Heads of Agreement which were negotiated and signed following competent legal advice may evidence a consensus between the parties. In this instance, the courts may be less likely to allow a departure from the terms.
If the other party is not willing to renegotiate, the court has the ability to order that the terms of the agreement reached that upheld.
If you have any questions about withdrawing from a Xydhias agreement, you can contact a member of our expert Family Team on 01202 499255.
What should I do if the other party wishes to withdraw from a Xydhias agreement?
If one party believes an agreement was final and wants the term made into a court order, they can ask the court to step in. This is done by making a “show cause” application.
A show cause application requires the person who now wants to withdraw from the agreement to explain and provide evidence as to why the agreement should not proceed. This application is made using Form D11 and a copy of the agreement or the relevant emails or letters should be provided with the application.
What will the Court take into consideration, before turning a financial agreement into an order?
The Court will review the facts of the case and the terms of the agreement itself to decide whether the agreement should be made into a financial order.
As part of this process, the Court is required to consider:
- the circumstances surrounding the making of the agreement;
- the extent to which the parties had acted upon the terms of the agreement;
- whether there has been a change in the parties’ financial circumstances since the date the agreement was reached;
- if there was a material lack of financial disclosure which could invalidate the terms;
- any evidence of fraud or misrepresentation by either party which was relied upon by the other; and
- section 25 of the Matrimonial Causes Act 1973 to ensure that the agreement reached is fair to all parties.
If the parties did not exchange financial disclosure, it will not automatically void the agreement. Especially if both parties were willing to reach an agreement based upon their understanding of the other’s finances without a full financial investigation.
However, the court will consider whether an injustice would be done in holding the parties to the agreement.
Our experts round up
“The court has the power to decide whether negotiations have turned into a binding agreement. It will look closely at what happened during the discussion, including emails and letters, to see whether both sides intended to settle.
In practice, the court will often find that an agreement exists where heads of terms have been signed or where there is a clear written exchange between lawyers confirming the agreed terms.
For this reason, it’s important not to sign or confirm any financial settlement until you’ve taken legal advice. Once terms are agreed in writing, the court may order you to stick to them.” Megan Spicer, Family Solicitor
Family Law Experts
At Frettens, we understand that everyone’s circumstances are different.
Our bright & experienced Family Team would be happy to talk to you to gain a better understanding of your situation and provide more tailored advice and support.
We offer a free chat with one of our family lawyers for all new clients. You can call us on 01202 499255 or fill out the form at the top of this page to get in touch.
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