is this contract legal?
i have a friend that is going thru a divorce. they were married for 20 years. during the marriage, they bought a house. when they bought the house, her parents loaned them $110,000 to put down on it. at that time, they wrote out an agreement to pay back the money and had it notarized. one of the agreements of the contract was that they were not aloud to take out another loan against the house until the money was paid back. a few years later the wife made the decision to take a second mortgage out on the house. now that they are going thru a divorce, she wants him to pay back half that loan. even tho her parents will never make her pay her own half. but i guess my question is, when she decided to take out the second mortgage, didn't that void that contract since it was stated that they were not aloud to borrow against that loan until her parents were paid back? and if he doesn't agree to pay this, would her parents have a case against him?
Comments
I would need to have a little more information to answer your question. Was the agreement to repay her parents in the form of a mortgage that was recorded in the public land records? Was the second mortgage subordinate to the parents' mortgage or did the parents subordinate their mortgage to the second mortgage? If your friend wants to be a credible party in the divorce, her parents will need to claim repayment from both parties and treat them equally. Otherwise a divorce Judge could easily determine the parents' loan was a gift and not a loan. If there is a question about whether the failure to pay the first mortgage at the time of the second mortgage was taken out voids the agreement, it is your friend's parents who need to come forward. If their agreement has not been recorded in the public records, maybe it should be recorded now. That way, if done properly, the parents' loan becomes a lien or encumbrance on the real estate and could arguably be entitled to payment upon the sale or refinancing of the property. Your friend and her parents need to consult with lawyers on this one. Preferably different lawyers to avoid the inevitable conflict.
Generally speaking:
1. Violating a term of an agreement does not void the agreement. Violating a term is a breach of contract, and the remedy is breach of contract damages. Damages are what a party is out as a result of the breach. Personally, I don't see any actual damages if payments continue to be made regularly and on time.
2. The divorce does not alter the loan agreement. If the agreement makes both husband and wife jointly and severally liable for repayment (i.e. parents can collect in full from either husband, or wife, or both), then after the divorce both ex-husband and ex-wife remain jointly and severally liable for repayment. Repeat: The divorce does NOT alter the parent's contractual rights to enforce the terms of their loan agreement.
Yes they would have a case.The only thing that would have happened if the parents voided the agreement would have been that the loan would have been due immediately not that they would not have had to pay it. He owes the money, it doesn't matter if they choose not to pursue their daughter for it. They are the ones who will be out the money.
somewhat under the law the first contract would have to state something about it being voided if certain things were done.. but voided in what way..? it is not like they are not going to still have to pay it off.
mostly who pays off what comes down to them agreeing to it or a judge telling them what they have to pay off. if he doesn't agree to pay half of a bill they both have, and the bills to pay off the house are both there, then a judge will have to decide..