Everyone has heard about premarital agreements, also known as prenuptial agreements. Most have also heard of marital agreements and separation agreements. What you may not have heard much about is cohabitation agreements, despite the fact that today, there are many people living together in informal partnership arrangements. While those people who live together without an express contract are not entitled to rights and privileges under Virginia law (Virginia does not acknowledge palimony suits), it is possible within the bounds of contract law to create and establish contractual obligations which may be enforced for the benefit of the partners.
In Virginia marriage is a status, not merely a contractual arrangement. However, when Virginia passed the constitutional amendment in defense of marriage, many people sought to keep the law from being passed by asserting that such a law would impair the rights of heterosexual and homosexual partners to contract with each other. As of this writing, it does not appear that this prediction has come to fruition; there are no reported cases on point. Meanwhile, people continue to enter into contracts, partnerships, joint ventures and business arrangements.
In our practice over the years we have seen many folks who entered into living arrangements, even business arrangements, investments and joint enterprises without the benefit of an express contract. Many of those people paid dearly for the oversight. While oral contracts are recognized in Virginia, it can be difficult or impossible to prove the terms of the contract where there is no writing and the parties do not agree as to the terms.
Certainly if you intend to invest your time and money into a project with another person it is a good idea to have a clear understanding of the agreements you have with that person, including the rights and obligations of each of you individually and jointly, and to memorialize those agreements, rights and obligations in a writing signed by both parties. Such express contracts, if properly drafted, may be enforced. On the other hand, failure to memorialize the agreements, rights and obligations in writing results in considerable uncertainty as to whether there is or is not an enforceable agreement and uncertainty as to the terms of the agreement.
What can you not do by contract? In Virginia you cannot by contract create a marriage without actually getting married. You cannot invest in your partner the status of a spouse with all rights and benefits of a spouse as if you were lawfully married without actually getting married.
What can you do by contract? You can determine your respective property rights in property you bring into the relationship and in property acquired while you are together. You can also determine your respective contributions to the maintenance of the household, as well as, the value of your respective contributions to the partnership, what payment, if any shall be made by each partner.
You can also determine the amount of contribution to be made to expenses, to investments and to enterprises, how you are going to handle your finances while you are together. These agreements can include an agreement to create a will or trust with provision for the partner, as well as a provision for “key person” life insurance. The agreement may and should also deal with dissolution of the partnership. In our practice, we have seen women pour tens of thousands of dollars up to $100,000 into properties titled solely in their friends’ names with nothing in writing. This is not sound business sense. Think about it; if you are going into business with another individual or into partnership with them, it makes sense to have a written agreement setting out the understandings and promises between you.
(c) 2009 by Virginia Perry, J.D. This article may be reprinted for personal use, provided the reprint states, “This article is being reprinted with the permission of the author, Virginia Perry, J.D.”