Family and Divorce - Pre-Nuptual Agreements

Pre-Nuptual Agreements

Before a couple marry, they may decide to try and regulate what is to happen to the assets of their marriage (or their civil partnership) in the event of a divorce or dissolution, by entering into a pre nuptial agreement.  Summarily, parties to a marriage or civil partnership may seek to regulate what is to happen about property and finances if they separate and may decide to do a post nuptial agreement.  Nuptial agreements would seem to be of an increasing significance, especially as pre nuptial contracts are enforceable in many European countries as well as the USA, South Africa, Canada, Australia and New Zealand. 

At present pre nuptial agreements are not legally binding in the UK.  However, while for a long time they have been considered as against public policy as they appear to undermine marriage, there has been a recent change in judicial thinking with more judges now prepared to consider that a fair and reasonable pre nuptial agreement signed in the right circumstances, should potentially be upheld.  This means that although they are not enforceable in UK law the court will now take any such pre nuptial agreement into account when making its final decision as to how matrimonial assets should be divided.

Due to the fact that at present pre nuptial agreements are not legally binding, some may ask whether it is worth in fact actually entering into one.  When a court decides how to divide matrimonial assets between the parties it will consider "all the circumstances of the case" when deciding the appropriate outcome.  If two adults have signed an agreement setting out what they think should happen if they were to divorce in the future, then it is quite appropriate that the pre nuptial agreement should be taken into account as part of the circumstances of the case.  Therefore, if the agreement is signed by both parties, with the benefit of legal advice, with financial disclosure and without undue pressure on either party and a reasonable time before the wedding, this may well provide protection to the parties on divorce.  Even if the court does not uphold the agreement in its entirety, the agreement may still have some bearing on the outcome of the case by reducing the award for example that the court may otherwise have made in their case.

There is no specific time frame for signing pre nuptial agreements but in recent case law (K v K [2003]) the court indicated that it would want both parties to have signed the agreement at least 21 days before the wedding.  This way it could be satisfied that neither party had been forced into signing the agreement without having proper consideration of the contents and also having taken the appropriate legal advice before signing the same.  The terms of the pre nuptial agreement can sometimes take several months to negotiate and agree, so the further in advance that a solicitor is instructed the better.  It is best not to rush the negotiation process as any pressure put on the parties, can in itself undermine the agreement.

Ordinary contractual principles do not apply to such agreements and this is one of the concerns that led Quentin Davies to put forward his Private Member's Bill in 2007 for the enforceability of pre-nuptual agreements. He said that with other agreements such as purchase and sale contracts, service agreements and employment contracts for example, parties who enter into such agreements can do so with the expectation that if there is a dispute the agreement will be enforced subsequently in a court in accordance with its terms and subject to normal common law safeguards, which, he said, would certainly apply to his bill regarding pre nuptial agreements.

In fact the Bill did not succeed and therefore at the current time the law has not changed. If statute were in due course to provide for the enforceability and relevance of pre nuptial contracts, parties will be required to show that (i) the contracts were entered into freely and voluntarily, (ii) both parties had the benefit of independent, competent legal advice and (iii) full disclosure was made of all relevant financial and other circumstances.

Despite the fact that pre-nupual agreements are not strictly enforceable nevertheless they are a matter that the cout can take into account. Their relevance will depend on the particular factors of the case but can provide some protection.  

If you would like any advice on pre or post nuptial agreements, or have any other issues regarding family matters we will be happy to help with any enquiries.