“If you cheat, I get everything.” The validity of infidelity clauses in financial agreements

Imagine we lived in a world where we could punish someone for being unfaithful.  Many people that have been cheated on may feel entitled to monetary compensation for their partner’s transgressions.

In the United States infidelity clauses are clauses in pre-nuptial agreements that impose a penalty, usually financial, for parties that are unfaithful during the marriage.  Infidelity clauses can also stipulate that the offended party would be entitled to a larger settlement in the event of divorce.

In Australia, these pre-nuptial agreements are referred to as financial agreements and you will be happy (or unhappy) to know that infidelity clauses are generally not enforceable.  Since the passing of the Family Law Act 1975, Australia participates in a no-fault divorce system meaning there is no longer the need to prove that one spouse was at fault for the breakdown of the relationship.  For a divorce to be valid in Australia, the only requirement for divorce is that the marriage has irretrievable broken down (evidenced by a minimum separation period of 12 months).  The court does not consider the reason the marriage broke down.

Additionally, the infidelity clause in American financial agreements is categorised as a ‘lifestyle clause’.  The Family Law Act typically only recognises agreements relating to finances between the parties.  Therefore, infidelity has no legal impact on divorce in Australia.

There are rare exceptions to this rule, where infidelity during the relationship may impact the division of property.

For example, if one party can prove that unfaithful spouse/partner has spent matrimonial funds on expensive items, such as holidays or extravagant gifts, for a third party, and in doing so has ultimately diminished the joint asset pool.

Wastage arguments are quite difficult to run however, and it comes down to the discretion of the court looking at all the facts of the matter.

In a world where infidelity clauses were valid and enforceable in Australia, there would be numerous difficulties.  The first is agreeing on the definition of infidelity.  Does merely texting another person without the knowledge of your partner count?  Does there have to be a physical component or is an emotional extramarital relationship sufficient?  What infidelity means to each partner would need to be explicitly defined.  Defining parameters may be difficult, particularly in regard to emotional cheating or extramarital online relationships.

Even if the definition was explicitly defined and mutually agreed upon, the difficulty of proof that infidelity occurred still remains.

To read more about financial agreements, please refer to our previous article (Are Prenups Just For Celebrities? Financial Agreement Facts To Consider Before Saying ‘I Do’. | Lavan).

If your relationship was impacted by infidelity or you are in the process of a separation or divorce, our family law team can assist you.

Disclaimer

The information contained in this publication does not constitute legal advice and should not be relied upon as such. You should seek legal advice in relation to any particular matter you may have before relying or acting on this information. The Lavan team are here to assist.

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