There has been a three-way approach to conflict avoidance employed by various attorneys in Colorado. These three alternatives fall under the general descriptive terms of prenuptial agreements, postnuptial agreements, and cohabitation agreements. The first two agreements are related to the marital relationship while the latter of the three concerns unmarried cohabitants who have decided to set forth, with specificity, the end of their non-marital business and personal partnerships. The length of time that the parties have lived together is irrelevant, assuming a common law marriage has not been created by them under Colorado law for the creation of such an arrangement. It is most often the case that parties cease living together have not employed any forethought to resolving financial obligations or entitlement to personal or real property. Without an enforceable cohabitation agreement between the parties, those parties are faced with potential creditors' claims, destruction or diminution in the value of their property, and expensive litigation.

 

It is not difficult to conjure the types of claims brought by attorneys in the absence of valid cohabitation agreements, supported by consideration, entered into by parties of lawful age and requisite mental capacity under circumstances of full and fair disclosure. These claims include: fraud, negligent misrepresentation, usurpation of partnership opportunity, theft, breach of fiduciary duty, breach of contract, unjust enrichment, and tortuous interference with prospective business (economic) advantage.

In the case of Salzman v. Bachrach, cohabitants filed claims against each other relating to a contributing cohabitant's supply of $100,000 toward purchase of a residence, plus free drafting and planning services for construction of a home.

Bachrach and Salzman enjoyed a personal relationship during the first several years of their social interactions. They maintained separate residences until approximately seven years after meeting when they agreed to build a home together. Bachrach placed his condominium on the market and sold it, netting roughly $100,000. The two of them, the following month, purchased a lot for $49,000, titled in both of their names. They contributed approximately equally to the purchase price. Bachrach, a designer and drafter of residential properties, designed the new home. He estimated total construction costs at $370,000. Ultimately, the home cost $520,000 to build. Bachrach contributed $167,528, while Salzman contributed $353,000 of the total cost. In March 1995, the residence appraised for $445,000. By November 1996, it appraised for $584,000. Bachrach quit claimed his interest in the property to Salzman. Salzman closed on the sale of her town home shortly after construction was completed in April 1995. Bachrach's delivery of a deed to Salzman facilitated Salzman's ability to obtain a favorable mortgage on the home and offered tax advantage to Salzman. In addition, Salzman's ex-husband had notified her that he intended to terminate his monthly maintenance payment because of her alleged marriage to Bachrach, cohabitation, and joint home ownership. Bachrach replied to Salzman's ex-husband advising him that Salzman alone owned the home and that his contribution was in exchange for an indefinite period of free rent. Salzman's ex-spouse did not pursue termination of maintenance after receiving the letter.

Salzman made all of the mortgage payments for the new home and Bachrach paid only for some utilities and food. He did not pay rent. A couple of years later Salzman changed the locks and excluded Bachrach from the home. Bachrach filed suit seeking a partition of the property, claiming that the two were joint venturers in construction of the home. Salzman asserted counterclaims for negligent home design, negligent construction, and other claims. Bachrach claimed that Salzman should reimburse him for his design work, construction management services, and his $170,000 contribution on the principle of unjust enrichment.

Salzman argued that Bachrach was without a remedy because he delivered the funds to her in exchange for a cohabitation agreement. She contended that public policy disapproved of such an arrangement. Bachrach retorted that he highly valued Salzman's companionship and that sexual relations constitute no part of the exchange. He indicated that his expectation was that he would live there indefinitely. Salzman relied on a line of cases which held that where the sole consideration for a monetary contributions was sexual relations, there was no enforceable agreement, expressed or implied, that could arise at law requiring one party to compensate the other because of Aunjust enrichment.@ The court noted that social norms and behaviors had changed to such an extent that prior cases dealing with adulteress conduct and sexual relations, stemming from the 1920s and 1940s, were no longer persuasive. The Supreme Court noted that the majority of courts in other states have held that non-married cohabitating couples may legally contract with each other so long as sexual relations are merely incidental to the agreement. Further, such couples were permitted to ask the courts for assistance, in law or in equity, to enforce such agreements. The court cited cases from Arizona, California (the landmark case of Marvin v. Marvin, Connecticut, Illinois, Massachusetts, Missouri, Nevada, North Carolina, Ohio, Oregon, and Wisconsin).

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The Supreme Court concluded with the determination that cohabitation and sexual relations alone do not suspend contract and equity principles. The court cautioned, however, that mere cohabitation did not trigger marital rights. The court noted that a trial court should not decline to provide relief to parties in dispute merely because their dispute rose in relationship to cohabitation. Rather, the trial court should determine, as with any other parties, whether general contract laws and equitable principles apply. The court concluded that evidence supported Bachrach's claim that his sexual relations with Salzman was not the sole motivation for his contributions toward the construction of the home.

Cohabitation agreements are enforceable in Colorado as long as they are not based solely on sexual favors and relationships. Like any other contract, a cohabitation agreement must have all of the elements of an enforceable agreement to be valid. The wise attorney will review with the cohabitants, or potential cohabitants, those material matters which those parties will face including, but not limited to: separate and joint property issues, income compensation matters, expense allocation and responsibility, arrangements for allocation, possession, and disposition of real and personal property in the event of termination of the parties' relationship, and enforceability of the cohabitation agreement. As with divorce matters, it is highly recommended that an attorney not serve as counsel for both cohabitors as the potentiality for irreconcilable conflict regarding the parties’ best interests is surely to be the case.