Most domestic relations practitioners have fairly standard agreement clauses which they are comfortable with and use day in and day out in the preparation of property settlement agreements. We have recently encountered two seemingly innocuous “boilerplate” clauses that can come back to bite if the document draftsperson does not consider all of what has transpired during the weeks, months or years culminating in the property settlement agreement. We offer two examples:
1. The typical settlement agreement incorporates a mutual release of all claims; whether past, present or future, that the parties may have against one another except for those related to enforcement of the property settlement agreement itself. Often, it makes reference to claims for past, present or future support. Is the intention in this case to release support arrearages that may have accrued prior to the agreement? Chances are that is not the case but shouldn’t your agreement make that point a clear element of the release.
On a related point, a couple of years ago, we reviewed a case where two spouses became immersed in a fight where the wife was injured severely enough to bring a civil action to recover damages. That case settled quickly and wife’s counsel (not her divorce attorney) had her sign a general release at the time the tort case was settled. The problem was that a divorce case was still pending in which Wife had raised claims for equitable distribution and alimony. In that instance, the Court permitted parole evidence and used it to decide that the release was not intended to include the pending divorce claims. But one can just as clearly assert that a general release is not an ambiguous document and that this was a case of unilateral mistake on the part of one spouse.
2. In many cases where closely held businesses are involved, there are often tax indemnity agreements and/or document confidentiality agreements. The former provide that the owner of the business will indemnify his/her spouse for tax liabilities imposed on the couple jointly based on problems with the business return. The latter are agreements that state that information or data provided in the divorced valuation process will be kept confidential.
Many standard property settlement agreements negotiated long after the indemnity or confidentiality agreements are reached contain language stating that the settlement agreement sets forth the “entire understanding of the parties and supersedes any and all prior agreements.” The practical effect is to dissolve the tax and confidentiality agreements. One wonders whether one could say that it might also be used to avoid pending court orders in support or custody as well. We think the latter argument a stretch but if the law of contract states that we are to give life to every word of an agreement according to its plain meaning, the argument could easily roll another way.