Separation Agreements as Contracts

Wooten v. Wooten, III, 2022-NCCOA-121, (unpublished).

Here in North Carolina, separation agreements are treated the same as contracts. This means the parties can be more flexible with their terms and agreements, not necessarily confined to the stricter terms that a court order would typically proscribe. One such provision is the support of children in their higher education endeavors.

• Facts: Mother and Father entered into a separation agreement with a provision that Father would agree to pay alimony in the amount of $4,000 per month and contribute $8,500 to each of his children’s 529 plans for education. Father’s alimony was only modifiable if his income had changed. Mother filed a breach of contract claim alleging that Father had stopped paying alimony and contributing to the college savings. She also moved for summary judgment. Father answered and admitted that he stopped paying alimony and contributing to the 529 plans. However, he also alleged that he was excused from doing so because of Mother’s breaches, such as Mother’s improper use of the funds in the 529 plans, failure to disclose her income when the separation agreement was signed, and her failure to distribute savings bonds to the oldest child. Trial court granted the summary judgment for Mother. Father appealed.

 

• Issue: Did the trial court err in granting summary judgment?

 

• Holding:

 

• Rationale: At the outset, Father argued there was a genuine issue of material fact that Mother breached the warranty of disclosure when she failed to disclose her income at the time the separation agreement was entered, and this failure to disclose constituted fraud. Fraud requires special pleadings showing the specific facts that constituted fraud. Father did not do this. Moreover, Father ratified the agreement. Ratification occurs when one party accepts the benefits of a contract and performs their duties under the contract. Ratification can also occur if, upon discovery of fraud, the party injured does not move to rescind the contract within reasonable time. Here, Father continued to accept the benefits and perform his duties long after he became aware of alleged issues in this separation agreement.

 

• Lessons and Observations:
• Dealing with it versus living with it – there seems to be a burden on the injured party to act when they discover improprieties with a contract. If you discover an issue, no matter the size, continuing to perform under the contract may lead to ratification and the loss of a claim or a defense.