Property Agreements in Divorce Decrees: Governed by Texas Contract Law

When spouses divorce in Texas, the final decree often includes a marital property settlement agreement—a legally binding document outlining how assets and obligations will be divided. But what many people don’t realize is that once approved by the court, these agreements are not merely judicial orders—they are contracts governed by Texas contract law.

As the Texas Supreme Court and multiple appellate courts have affirmed, property agreements set forth in divorce decrees carry the same legal weight as any other contract. That means they are subject to the same rules of interpretation and the same defenses—fraud, duress, mistake, mental incapacity, and undue influence.

Property Division in Divorce: Treated Like a Contract

Courts in Texas have repeatedly held that property agreements within divorce decrees are governed by the law of contracts—not judgments. This principle means that when interpreting or challenging a divorce settlement, the same rules used in business or personal contracts apply.

As the Texas Supreme Court explained:

"Property agreements set forth in divorce decrees are governed by the law of contracts."

 — Buys v. Buys, 924 S.W.2d 369, 372 (Tex.1996)

Further reinforcing this:

“A marital property agreement, although incorporated into a final divorce decree is treated as a contract and its legal force and meaning are governed by the law of contracts, not the law of judgments.”

 — Allen v. Allen, 717 S.W.2d 311, 313 (Tex.1986)

These principles allow individuals to challenge such agreements under contract doctrines like duress, fraud, mistake, or undue influence.

When Can You Void a Divorce Property Agreement?

Mental Health and Undue Influence May Render Contracts Voidable

A property division contract, just like any contract, may be invalidated if one party lacked the mental capacity to understand its terms at the time of signing. Courts across the U.S. have considered the role of mental illness, depression, and undue influence in assessing whether a contract should be voided.

Some examples include:

• G.A.S. v. S.I.S., 407 A.2d 253 (Del. Fam. Ct. 1978): Cancellation of a contract is appropriate if a person’s mental faculties were so impaired that they couldn’t protect their property rights.
• Matter of Guardianship of Collins, 327 N.W.2d 230 (Iowa 1982): Mental incapacity must rise to the level that a party didn’t understand the contract.
• Urbain v. Speak, 258 Iowa 584, 139 N.W.2d 311 (1966): Emotional disturbance alone isn’t enough unless it’s coupled with fraud or undue influence.

“The test of a person’s mental capacity to enter into a contract is whether the person understood the nature of the transaction and the effect of their own actions.”

 — Mandell & Wright v. Thomas, 441 S.W.2d 841 (Tex. 1969)

Timing of Mental State Matters

Texas courts look at the party’s mental condition at the time of execution, not before or after. One of the most critical elements in determining whether a contract—such as a divorce property settlement—can be voided for mental incapacity is the timing of the party’s mental state. Texas courts are clear: the relevant inquiry is not whether a party suffered from mental illness before or after signing the agreement, but whether they lacked capacity at the precise time they entered into the contract.

This principle is consistent with Texas law and reinforced by multiple jurisdictions across the United States. The legal standard focuses on whether the party understood the nature and consequences of the transaction at the moment of execution.

“The mental capacity to contract must exist at the time the agreement is executed. Incapacity before or after is relevant only to the extent that it helps prove the party’s mental state at execution.”

 — Mandell & Wright v. Thomas, 441 S.W.2d 841 (Tex. 1969)

While signs of mental instability before or after may support an argument for incapacity, they are not sufficient on their own. Courts require evidence that the person lacked the cognitive ability to comprehend and consent to the agreement when they signed it.

Case Examples from Other Jurisdictions Supporting Texas Law

Other jurisdictions also emphasize the same “moment-of-execution” rule:

• Reid v. IBM Corp., 1997 WL 357969 (S.D.N.Y. 1997): The court emphasized that the relevant issue is whether the individual understood the nature of the release they signed at the time they signed it, not whether they later regretted it or later showed signs of incompetence.
• Forman v. Brown, 944 P.2d 559 (Colo. Ct. App. 1996): Colorado’s appellate court held that testimony regarding mental state after contract execution was not conclusive; what mattered was the party’s competence at the time of signing.
• McCraw v. Watkins, 242 Ga. 452, 249 S.E.2d 202 (1978): The Georgia Supreme Court ruled that a contract is valid unless the evidence clearly demonstrates that the person did not comprehend the transaction when the contract was executed.

These cases mirror the position of Texas courts and reinforce a central concept in contract law: mental illness or emotional stress does not automatically render a contract void or voidable. There must be clear, convincing evidence that the individual was incapable of understanding the agreement at the time it was made.

Duress and Physical or Psychological Pressure

Duress can also void a contract. According to the Restatement (Second) of Contracts § 174, physical coercion or other forms of undue pressure can invalidate consent, rendering a contract either void or voidable depending on the circumstances.

“A party’s conduct is not effective as a manifestation of his assent if he does not intend to engage in it. … He is, it is sometimes said, 'a mere mechanical instrument.'”

 — Restatement (Second) of Contracts § 17

This is echoed by Texas courts, where duress generally renders a contract voidable—not automatically void.

“Duress … may be merely a ground for allowing the avoidance of a bargain by its victim.”

 — Contempo Design, Inc. v. Chicago and N.E. Ill. Dist. Council of Carpenters, 226 F.3d 535 (7th Cir. 2000)

Legal Standards for Undue Influence and Duress in Texas

What Counts as Duress in Texas?

Under Texas law, duress can make a contract voidable—but not every type of pressure or emotional tension qualifies. The legal standard for duress in Texas is narrow and well-defined. To successfully void a contract (including a marital property settlement) based on duress, a party must prove three essential elements:

1. A threat to do something the threatening party has no legal right to do
2. An illegal exaction, fraud, or deception
3. An imminent threat that destroys the victim's free will or agency

Texas courts are strict in applying these standards. As the Texas Supreme Court explained:

“It is never duress to threaten to do that which a party has a legal right to do.”

 — Ullmer v. Ullmer, 139 Tex. 326, 162 S.W.2d 944, 947 (Tex. 1942)

In other words, if someone threatens to take a lawful action—such as filing for divorce, seeking custody, or refusing to sign a new agreement—that does not constitute duress under Texas law.

Duress Must Involve an Unlawful or Coercive Threat

The threat must be wrongful or illegitimate to constitute duress. Courts will not invalidate a contract simply because one party made a difficult or harsh demand.

Examples of not duress:

• A spouse threatens to seek sole custody if the other doesn’t agree to a settlement — awful action.
• A party threatens to withhold consent to a property division unless they receive a greater share —  legally permitted negotiation tactic.

Examples that may be duress:

• A spouse threatens to report false criminal allegations to law enforcement unless the other party signs —  unlawful threat.
• A party coerces agreement by threatening to take children out of state in violation of court orders —  illegal exaction.
• A party uses physical intimidation or threats of violence — grounds for duress and possibly criminal prosecution.

In emotionally charged divorce situations, parties often feel pressured. However, emotional distress or tough negotiations alone are not enough to invalidate a divorce decree or property agreement under Texas law. To prove duress, you must show that your consent was not voluntary, because the threat was so severe and so improper that you had no reasonable alternative but to agree.

 “If a party's manifestation of assent is induced by an improper threat by the other party that leaves the victim no reasonable alternative, the contract is voidable by the victim.”

 — Restatement (Second) of Contracts § 175(1)

In practical terms, unless there is wrongful coercion, illegal leverage, or fraudulent conduct, most Texas courts will uphold divorce-related contracts—even if they were signed under emotional or financial pressure.

Proving Undue Influence

In Texas, a party seeking to set aside a divorce-related contract, such as a marital property agreement, may do so on the grounds of undue influence—but the burden is high. Undue influence is not simply pressure or persuasion; it refers to wrongful or excessive pressure that destroys free will, resulting in a decision the party would not have otherwise made.

Texas courts apply a well-established three-part test, laid out in the landmark case Rothermel v. Duncan, 369 S.W.2d 917 (Tex. 1963). This test continues to guide courts in evaluating whether a contract—especially one signed during emotionally vulnerable times like divorce—should be set aside.

The Rothermel Test for Undue Influence

To prevail on a claim of undue influence, a party must prove all three of the following:

1. Existence and Exertion of an Influence

The first element requires proof that an influence existed and that it was actively exerted on the vulnerable party.

• This influence may come from family dynamics, emotional manipulation, mental health imbalances, or dependence on the influencing party.
• In divorce cases, this may involve one spouse dominating or controlling the other through psychological pressure, gaslighting, or exploiting a mental health condition (such as depression, anxiety, or trauma).

Importantly, mere opportunity to exert influence—such as having a close relationship—is not enough. There must be some action or conduct that influenced the other party’s decision.

2. The Influence Overpowered the Mind of the Person Executing the Agreement

This is the heart of the test. The influence must be so strong that it subverted or overrode the free will of the person signing the agreement.

• It’s not enough to show the party was sad, stressed, or grieving—you must show that their decision-making ability was impaired to the point they were unable to act in their own interest.
• This might include signing a marital agreement during a period of severe depression, while under threats, or when heavily reliant on the other spouse for care or finances.

3. The Agreement Would Not Have Been Made But For That Influence

Lastly, the court must find that the agreement would not have been signed but for the wrongful influence.

• This is a “but-for” causation standard—i.e., the party would not have entered into the agreement absent the undue influence.
• The agreement must appear unnatural, unfair, or inequitable given the facts and relationship of the parties. In divorce cases, this might mean a one-sided division of assets, a waiver of spousal support under questionable conditions, or provisions that benefit the dominant party without justification.
  

Challenging a Divorce Decree Through a Bill of Review

A Bill of Review in Texas is a special type of equitable proceeding that allows a party to attack and set aside a final judgment that can no longer be challenged by a motion for new trial or an appeal. It’s essentially a legal “last resort” when normal deadlines have passed but there’s a compelling reason why the judgment should not stand. If a divorce decree has become final and no longer subject to appeal, a party may seek to set it aside using a the bill of review.

“A bill of review is an equitable action … to set aside a judgment that is no longer subject to challenge by motion for new trial or appeal.”

 — Caldwell v. Barnes, 154 S.W.3d 93, 96 (Tex. 2004)

To succeed, the petitioner must show:

• A meritorious claim or defense,
• That fraud, accident, or wrongful act prevented them from presenting it, and
• That the failure to raise the claim wasn’t due to their own fault.

Property Agreements in Divorce Can Be Challenged

If a divorce property settlement agreement was signed under emotional duress, mental incapacity, or undue influence, it may be voidable under Texas contract law. Courts recognize that these agreements, although part of a final judgment, are fundamentally contracts—and may be rescinded if justice demands. Petitioners in Texas may use tools like a bill of review to seek a new division of property and potentially nullify unfair agreements.

If you’re concerned that your divorce decree or marital agreement was signed under pressure or emotional distress, it may not be too late to act.

Our experienced Texas family law attorney can help evaluate whether your agreement should be set aside.