Civil and Commercial Perspective | An Analysis of the Validity of Provisions Regarding Property and Debt Treatment in Divorce Agreements

1. Legal provisions

Article 1076 of the Civil Code of the People’s Republic of China states: “If both spouses voluntarily wish to divorce, they shall sign a written divorce agreement and personally apply for divorce registration at the marriage registry office. The divorce agreement shall clearly state the mutual consent of both parties to divorce and their mutually agreed-upon arrangements regarding child custody, property division, and debt settlement.” Article 69, paragraph 2, of the Supreme People’s Court’s Interpretation (I) on the Application of the Marriage and Family Chapter of the Civil Code of the People’s Republic of China stipulates: “The provisions in the divorce agreement signed by the parties pursuant to Article 1076 of the Civil Code concerning the handling of property and debts shall be legally binding on both the husband and the wife. If, after registering the divorce, the parties file a lawsuit arising from disputes over the performance of the aforementioned agreement, the people’s court shall accept the case.”

2. Case

On July 25, 2022, Party A and Party B reached an agreement on divorce, under which Party B was obligated to compensate Party A RMB 130,000 by December 25, 2022, after obtaining the divorce certificate. Party A filed a lawsuit upon the expiration of the performance deadline, demanding that Party B pay the compensation sum of RMB 130,000. The court held that both Party A and Party B are fully capable of civil conduct and should each bear legal responsibility for their own actions. The “Divorce Agreement” is a voluntary agreement entered into by Party A and Party B regarding divorce, property division, and other related matters; it reflects the true intentions of both parties and does not violate any applicable laws or regulations. Therefore, this court confirms its validity. Since both parties have obtained the divorce certificate, the conditions precedent for the effectiveness of the Divorce Agreement have been fulfilled, and the agreement has thus become legally binding. According to the terms of the Divorce Agreement, Party B was required to pay Party A the full compensation amount of RMB 130,000 no later than December 25, 2022. To date, Party B has failed to fulfill its payment obligation as agreed, constituting a breach of contract. Consequently, Party A’s claim that Party B pay the compensation sum of RMB 130,000 is factually and legally justified, and this court hereby supports such claim.

1. Legal provisions

Civil Code of the People's Republic of China Article 158 The regulation states: “Civil legal acts may be subject to conditions, except where the nature of the act itself does not permit the imposition of conditions. A civil legal act subject to a condition for its effectiveness shall become effective upon the fulfillment of that condition. A civil legal act subject to a condition for its termination shall cease to be effective upon the fulfillment of that condition.” The property division clause in a divorce agreement is accessory in nature and becomes effective upon completion of the divorce registration. After the divorce agreement takes effect, either party has the right to demand that the other party fulfill its obligations. Accompanying obligations 。

2. Case

When Jia and Yi registered their divorce by agreement, Article 3 of the “Divorce Agreement” stipulated that the jointly owned marital home would be transferred to Jia and a third party, Bing (the minor son born to Jia and Yi). Yi was required to assist Jia and Bing in completing the procedures for registering the change of real estate ownership. After the divorce, Jia repeatedly requested Yi to assist in handling the registration procedures for the transfer of ownership of the property in question, but Yi refused to cooperate. Consequently, Jia filed a lawsuit with the court.

Both parties agree that the property in dispute should belong to the plaintiff and the third party, C. However, Party B does not consent to completing the property ownership transfer procedures at this time. In this regard, the court holds: First, the agreement between Parties A and B explicitly stipulates that the property in dispute belongs to Party A and the third party. Regardless of whether the divorce agreement explicitly states that Party B has a duty to cooperate, Party B is still obligated to assist Party A and the third party, C, in completing the property transfer procedures once the agreement becomes effective. This obligation constitutes an ancillary duty of Party B arising after the divorce agreement takes effect. Therefore, provided that the agreement remains valid, Party B must comply with Party A’s request and facilitate the property transfer.

In practice, provisions concerning the disposition of real estate over which ownership has not been acquired constitute unauthorized dispositions and shall become effective only upon ratification by the rightful owner or after ownership has been obtained. However, the portion dealing with the joint property remains valid. If the disposition act is invalid, the validity of the agreement itself will not be affected, and any changes in property rights covered by the agreement will not take effect.

1. Legal provisions

Article 70 of the “Interpretation (I) of the Supreme People’s Court on the Application of the Marriage and Family Section of the Civil Code of the People’s Republic of China” provides: “If, after a divorce agreement has been reached by both spouses, one party retracts and requests the annulment of the property division agreement, the people’s court shall accept the case. After reviewing the case, if the court finds no evidence of fraud, coercion, or other similar circumstances at the time the property division agreement was entered into, it shall dismiss the plaintiff’s claim in accordance with the law.” If the divorce agreement involves fraud, coercion, or malicious collusion that harms the interests of third parties, the relevant provisions shall be deemed invalid.

2. Case

Party A (male) filed a lawsuit with the court requesting the annulment of the provisions in the divorce agreement concerning property division and debt allocation. The court held that Party A must provide evidence to prove that, at the time of the divorce agreement signed with the female party, there were circumstances such as fraud or coercion involved in the property division clause. However, during the litigation, Party A merely claimed that the two parties had reached a verbal agreement but failed to submit any evidence substantiating the existence of fraud or coercion at the time the divorce agreement was executed. Therefore, the agreement between the two parties regarding property division and the sharing of joint debts in the divorce agreement reflects their true intentions and is neither invalid nor subject to rescission. Consequently, Party A’s request for a redivision of assets should not be granted.

Article 69 of the “Interpretation (I) of the Supreme People’s Court on the Application of the Marriage and Family Chapter of the Civil Code of the People’s Republic of China” provides: “If the parties have entered into an agreement on the disposition of property and debts conditioned upon either divorce by mutual consent or divorce through mediation by the People’s Court, and if the divorce does not proceed and one party subsequently retracts its consent in the divorce litigation, the People’s Court shall hold that such agreement on the disposition of property and debts has not taken effect, and shall render a judgment in accordance with the actual circumstances, applying the provisions of Articles 1087 and 1089 of the Civil Code.”

1. If a lawsuit is filed in court without first registering for divorce, the court will generally determine that the agreement has not taken effect.

If the parties have reached a property division agreement conditioned on either registering for divorce or reaching an amicable divorce agreement through the People’s Court, and if the agreed-upon divorce fails to materialize, and one party subsequently retracts their consent in the divorce litigation, the People’s Court will determine that the property division agreement has not taken effect. The court will then divide the marital joint property according to the actual circumstances and in accordance with the law. In other words, if the agreed-upon divorce does not succeed, the previously signed property division agreement will have no legal binding force, and the court will not be constrained by the terms of that agreement when dividing the marital joint property.

2. Autonomy of will should be respected.

If the parties have agreed in their agreement that the property division clause remains valid regardless of whether or not they register for divorce, the author believes that the court should respect the parties’ agreement.

According to Article 13 of the “Interpretation by the Supreme People’s Court on Several Issues Concerning the Application of the General Provisions of the Contract Part of the Civil Code of the People’s Republic of China,” even if an agreement has been fulfilled and registered for amendment, it will still not be protected by law if it falls under circumstances rendering it invalid or revocable. A divorce property division agreement may constitute an act that harms creditors’ rights and thus requires... Creditor's Right of Revocation Review: If the division of property is excessive and harms the interests of creditors, the court may partially revoke it.

According to Article 209 of the Civil Code of the People's Republic of China, the establishment, modification, transfer, and extinction of real property rights shall take effect upon lawful registration; without such registration, these rights shall not take effect, unless otherwise provided by law. Therefore, any agreement in a divorce agreement regarding the ownership of real properties such as houses and land use rights, if no change-of-registration procedures have been completed, shall only be binding internally between the spouses and will not automatically prevail against bona fide third parties who are unaware of the agreement. Even if a divorce agreement specifies the allocation of property, where the nature of the property requires a change of registration, the agreement on property ownership alone will not directly produce the effect of a change in property rights; instead, the registration procedures must be duly carried out. The agreement must not impair the legitimate rights and interests of third parties; otherwise, the relevant provisions shall be deemed invalid.

1. Must not be asserted against a bona fide third party.

For example, if a married couple agrees in their divorce agreement that a commercial residential property registered under the husband’s name shall belong to the wife, but they fail to promptly complete the transfer of ownership registration, and subsequently the husband sells the property to an unsuspecting third party and completes the transfer registration, the wife, when asserting her ownership rights based on the divorce agreement, will typically find her claim supported by the court under the principle of bona fide acquisition. As a result, the wife can only seek compensation from the husband for breach of contract.

2. If a divorce agreement contains provisions that harm the legitimate rights and interests of third parties, the third party has the right to request the cancellation of such provisions.

The creditor’s right of revocation refers to the right enjoyed by a creditor to request the people’s court to revoke any act committed by the debtor that jeopardizes the realization of the creditor’s claim. For example, if a married couple, knowing full well that one spouse has outstanding debts, nevertheless agrees in their divorce agreement to gratuitously gift jointly-owned marital property to their children without considering that such property has already been mortgaged to a third party, and the agreement is made without the consent of the mortgagee, this could impair the mortgagee’s priority right to repayment. The agreement regarding the jointly-owned marital home objectively affects the legitimate rights and interests of the creditor, and such conduct may, in practice, result in insufficient assets available for enforcement after the creditor applies for compulsory execution, thereby rendering the creditor’s claim unenforceable. Therefore, the mortgagee is entitled to invoke the provisions of the Civil Code of the People’s Republic of China. Article 538 Pursuant to the provisions of Article 539, we request the court to revoke the gift clause.

In cases where a couple has repeatedly divorced and remarried, each divorce agreement filed for record shall be legally valid if it genuinely reflects the parties’ true intentions, and its validity is not affected by changes in their marital status.

Notarization merely confirms the authenticity of the agreement’s content and does not alter its nature as a conditional contract. The notarized agreement still requires divorce registration as a prerequisite for its effectiveness.

The validity of a divorce agreement must be assessed comprehensively, taking into account the genuine expression of intent, legality, fulfillment conditions, and external factors. Invalid clauses primarily involve restrictions on personal freedom, unauthorized dispositions, and acts that harm creditors’ rights. As for conditional agreements and notarized agreements, their validity must be determined in light of the specific circumstances of their performance.

(Disclaimer: This article reflects the author’s views based on personal experience and is intended for exchange and discussion only.)