A family arrangement is a transaction between members of the same family which is for the benefit of the family generally. Matters which would be fatal to the validity of similar transactions between strangers are not objections to the binding effect of family arrangements which tend to the preservation of the family property, or to the avoidance of family disputes and litigation, or to the saving of the honour of the family.
Family used in this sense has a wide meaning, including illegitimate members and persons yet to be born.
The following are examples of family arrangements which have been supported by the Court. A settlement made by parents on the occasion of their child's marriage making provision for the mother, though outside the marriage consideration, on her giving up her right to dower in her husband's estate.
An agreement between father and son altering the limitations of a family settlement.
An agreement providing for payment of the son's debts in consideration of his giving up his interest in the family business.
A covenant to settle property on a nephew, alienated from his father by a marriage without his father's consent, in order to reconcile father and son.
A resettlement of the family property making provision for an illegitimate child.
An agreement between members of a family to divide equally whatever they obtain under the will of an ancestor.
An agreement between co-heiresses dividing the property between them.
The following are examples of family arrangements which cannot be supported :
Any dealing between parent and child, before the latter is fully emancipated, exclusively for the advantage of the parent.
A compromise of claim to estates founded on a mistake as to the title induced by misrepresentation of one of the parties to the compromise.
An agreement as to division of property where the heir gave up property to which he had undoubted rights without consideration, and where he was ignorant, a drunkard, and without professional assistance, though there was no evidence of fraud or undue influence.
An agreement as to family property not executed by all the intending parties to it.
Any members of a family may be parties to a family agreement. Agreements between husband and wife, parent and child, legitimate or illegitimate, uncle and nephews and nieces, co-heiresses, brothers, have all been supported as family arrangements. An arrangement is not implied from a mere course of dealing, although it is strong evidence of an agreement in existence. All parties must adopt the arrangement, otherwise it will not be binding even on those who have executed the document. Persons not parties to a family arrangement may benefit under it and be within the consideration of the contract.
The Court will support as a family arrangement any transaction between members of the same family which is generally for the benefit of the family estate or of all the parties concerned. The absence or inadequacy of the consideration is, as a rule, not inquired into, but the family arrangement must be mutual and reasonable. Any party being in an inferior position by reason of undue influence, drunkenness, ignorance, non-disclosure, or misrepresentation will render it defective or, at any rate, voidable.
It is not essential that the various parties should have separate advice. Any party may be properly advised by the family solicitor, although it is obvious that there may be occasions when it is advisable for some of the parties to be advised by a separate solicitor or counsel, as, for example, when they are at a disadvantage through lack of education or of an inferior social position. It is not sufficient merely to read over the documents, the parties must be made to understand their effect.
The right to set aside or vary the terms of an arrangement may be lost by acquiescence, long delay, the acquisition of rights by third parties, or the impossibility of restoring matters to their former state. Slight differences from the intention of the parties contained in the document are no ground for cancellation, but only for ratification. An obnoxious feature may also be removed by the same means.