When is a financial agreement binding?
Edgar v Edgar  EWCA Civ 2
Since the case of Edgar v Edgar  EWCA Civ 2 agreements between parties about the division of their assets have been referred to as ‘Edgar Agreements’. This is an agreement made when parties separate about how their finances should be divided as if there were a final divorce. The intention is that the terms will be binding on them if they later divorce.
This case concerned a married couple who separated in 1975. Upon separation the parties’ entered an agreement whereby the wife received approximately £100,000 to rehouse herself and the children. The wife agreed that in a future divorce she would not seek a lump sum or property transfer orders from the husband. A Deed of Separation was drafted in these terms and the wife signed the agreement despite being advised that she was entitled to a much larger sum given the fact that the husband was an extremely rich multimillionaire.
The wife petitioned for the divorce in 1978 and then applied for financial relief in 1979. The husband argued that the wife should be bound by the terms of the deed of separation. Initially, a judge decided that the wife should not be held to her earlier undertaking and ordered the husband to pay a lump sum of £670,000 which capitalised the wife’s spousal maintenance claim and child maintenance claim.
The husband appealed this decision. The Court of Appeal considered the effect of the wife’s undertaking. Lord Justice Ormrod said:
“To decide what weight should be given in order to reach a just result to a prior agreement not to claim a lump sum, regard must be had to the conduct of both parties leading up to the prior agreement, and to their subsequent conduct in consequence of it … Important too is the general proposition that formal agreements properly and fairly arrived at with competent legal advice should not be displaced unless there are good and substantial grounds for concluding that an injustice will be done by holding the parties to the terms of their agreement.”
The Court of Appeal, therefore, held that there was no evidence and no good reason was shown that the husband used the disparity of his bargaining power to prejudice the wife’s position. The husband’s appeal was allowed and the wife’s financial claims were dismissed.
The court’s approach in upholding or departing from the terms of Edgar Agreement’s remain largely the same in that the court will make an order in the terms agreed in any subsequent divorce proceedings if there has been disclosure, independent legal advice and no duress, misrepresentation, undue pressure, exploitation of a dominant position or unforeseen circumstances overlooked when the agreement was made.