Marital Settlement Agreement in New Jersey | L&ML Lawyers

Enforcing Your Marital Settlement Agreement in New Jersey

March 16, 2020
BY: Lesnevich, Marzano-Lesnevich, O'Cathain & O'Cathain

Marital Settlement Agreement in New Jersey

Clients are normally, and quite reasonably, concerned about whether their former spouse will comply with the terms of the Marital Settlement Agreement in New Jersey. In order to assuage those concerns, agreements tend to include provisions requiring the payment of counsel fees should the aggrieved party successfully file an enforcement motion. Less often, agreements will provide for monetary relief in the form of a daily penalty when one party breaches the agreement. This was the case in the matter of Holtham v. Lucas, 460 N.J. Super. 308 (App. Div. 2019).

Following a relatively short marriage of five years, the Husband and Wife were divorced and entered into a Marital Settlement Agreement. Pursuant to their agreement, the Wife would retain exclusive possession of a car and the Husband was required to pay off the remaining loan on that car by a certain date. Their agreement further provided that Husband would pay $150.00 fine per day for each day of noncompliance with respect to his obligations under the agreement. While the Husband eventually paid off the balance of the car loan, it was not before accruing $18,450.00 in punitive charges for 123 days of noncompliance, which he refused to pay.

When the matter came before the trial court, the Husband’s counsel argued that the monetary penalty was unenforceable under traditional contract principles as it was considered an excessive amount for a future breach. After hearing limited testimony from Husband, the trial court enforced the fine finding that Husband had the ability to pay but unjustifiably chose not to. On appeal, the Appellate Court addressed the reasonableness of the agreed-upon penalty clause, discerning whether the stipulation was an “estimate in advance [of] the actual damage that will probably ensue from the breach,” opposed to a penalty or punishment. The Court articulated a two-prong analysis in determining the nature of the clause: (1) “the extent the stipulated amount is within a plausible range of actual damages, viewed from either the time of contracting or breach;” and (2) “the difficulty of calculating damages upon breach.”

Based on the two-prong analysis, the Court found that the MSA term was unquestionably a penalty and would not be enforceable under contract law. However, the Appellate Division determined that “the policies underlying contract principles do not apply with equal force in the divorce context.” When viewed in the context of matrimonial matters, the Court held that the voluntary nature of settlement agreements, the policies “favoring sanctions to deter non-compliance with matrimonial orders” and the family court’s broad power to reform or invalidate unconscionable or fraudulent provisions of a divorce judgment weighed in favor of enforcing the penalty provision.

Ultimately, the penalty rule promulgated under traditional contract principles does not apply in the matrimonial realm and penalty provisions will be enforceable in family court matters as long as the penalty is proportionate to the breach and resulting harm, including any emotional distress a party may experience. As a result, incorporating penalty provisions into your Marital Settlement Agreement to incentivize your spouse to comply is worth your consideration.

Contact The New Jersey Divorce Lawyers at Lesnevich, Marzano-Lesnevich, O’Cathain & O’Cathain, LLC

Although our goal is to resolve your case efficiently and amicably, our New Jersey divorce lawyers have years of experience trying divorce cases and they can provide you more information about the marital settlement agreement in New Jersey. We strive to make the trial process as simple as possible while zealously advocating for you and your positions.