Testamentary contract

A testamentary contract is a legally binding agreement between two individuals for the inclusion of a certain provision in one party’s future will. A will is the legal document which sets out the maker’s wishes for the distribution of their assets upon their death.

A testamentary contract is executed to provide security for the promise that matters or assets will be dealt with in a certain way in a will which is yet to be drafted, or yet to come into force. The ‘product’ of the contract is the provision in the will (i.e. a future bequest) which is promised in return for some consideration (i.e. current performance).

A testamentary contract must consist of:

  • offer and acceptance
  • intention to be legally bound
  • consideration
  • legal capacity of both parties to contract

For example, take a family of five (three children, two parents). The family owns a farm which requires significant maintenance and upkeep which the parents are finding difficult to perform themselves. The parent/s then enter into a testamentary contract with their eldest child, promising that the bulk of their estate will be left to the eldest child should they continue to successfully maintain the farm until their parents pass. This gives both parties security: the parents can be sure that the farm will be maintained, and the eldest child can be sure that they will be justly compensated (via their parents’ will) for their efforts. It also provides the eldest child with a legally binding record of the parents’ intention to divide their will in favour of the eldest, allowing them to definitively rebuff any attempts by their siblings to contest the will.