Nuptial Agreements - What Are They & Are They Binding?
You would be forgiven for questioning the validity of Nuptial Agreements, as before 2010 little credence was afforded to them by the courts in this country.
What is a Nuptial Agreement?
A Pre-Nuptial Agreement is an agreement entered into by two parties ahead of their marriage or civil partnership, which sets out the ownership of their financial assets and in the unfortunate event the intended marriage or civil partnership ends, how they intend to divide these assets.
A Post-Nuptial Agreement similarly defines the above assets and parties’ intentions but is entered into after the parties have married or formed a civil partnership.
Nuptial Agreements are valid in a great many European countries, the US, Canada and Australia.
The Position Before 2010
Whilst the courts demonstrated a reluctance to recognise Nuptial Agreements, there is caselaw in which judicial support is given to upholding formal agreements properly concluded and arrived at fairly between the parties. The 1980 case of Edgar v. Edgar held that when determining what weight the court should attach to such agreements, it is important to consider the conduct of the parties and circumstances surrounding the agreement. Further there should be consideration of whether any undue pressure or exploitation of a dominant position has been exerted, whether the parties had full knowledge of the other party’s financial circumstances and whether the parties received legal advice.
What Changed in 2010?
The Supreme Court in the case of Radmacher v Granatino held that Nuptial Agreements are not contrary to public policy.
The case in question concerned a German heiress and a French national husband, who entered into a pre-nuptial agreement in Germany 4 months ahead of their marriage in London in 1998. The parties were of similar ages, 29 and 27 respectively, and went on to have 2 children in 1999 and 2002. Whilst the Husband was, at the outset of the parties relationship, working as a banker at JP Morgan and earning a significant salary, the Pre-Nuptial Agreement was initiated by the Wife to protect the family wealth she had already received and that was anticipated in the future. The parties separated after 8 years of marriage and shared care of the children. Notwithstanding that the Pre-Nuptial Agreement, which was prepared by a German notary, was not fully translated into English for the benefit of the Husband and the parties waived the possibility of having a schedule of their respective assets appended to the Deed, ultimately a majority of the Supreme Court held that it was not unfair to hold the Husband to the Agreement. The Agreement did not however make provision for the benefit of the two children and as such any additional award was based on the Husband’s role as Father.
The Supreme Court provided guidance on how Nuptial Agreements should be treated, indicating that:
“The court should give effect to a Nuptial Agreement that is freely entered into by each party with a full appreciation of its implications unless in the circumstances prevailing it would not be fair to hold the parties to their agreement”.
What Makes a Valid Nuptial Agreement?
- For an Agreement to be valid, it must be freely entered into – so there must be no duress and the agreement should not be entered into on the eve of the wedding or civil partnership (at least 21 days before). The Law Commission’s recommendation (pursuant to their 2014 report) is 28 days – my view is that the more time that there is between the execution of the Agreement and the wedding/civil partnership, the better!
- The emotional state, age and understanding of the parties should be taken into account. The parties must fully appreciate the implications of what they are signing up to and legal advice is essential in most cases.
- There should be an exchange of financial disclosure and the parties should know the importance of being full and frank.
- The court’s discretion pursuant to section 25 of the Matrimonial Causes Act 1973 cannot be ousted and as such the terms of any Agreement should not be unfair to any party, with both parties’ needs being adequately met.
- It is also important that provision is made for any minor children and I would recommend that a review clause is incorporated for this purpose.
Law Commission Recommendations
On 27 February 2014 the Law Commission published their report “Matrimonial Property, Needs and Agreements” recommending that Nuptial Agreements (prepared in a prescribed form and with certain safeguards in place) are binding.
Such Agreements would be called “Qualifying Nuptial Agreements” and would be upheld by the court (save in circumstances where an Order is required to meet needs and make provision for a child or children). The criteria set down echoes the guidance set out by the Supreme Court in the Radmacher case. Thus far this legislative change is awaited.
Why Enter into a Nuptial Agreement?
- Often Nuptial Agreements are entered into where one party to a marriage is substantially wealthier than the other.
- The relevant party may have inherited wealth, be the beneficiary of a family trust or be a widower.
- One party may be a much higher earner than the other party or have pre-acquired business assets.
- One or both parties may have been previously married and have children from that marriage – they may be seeking to protect assets arising from their former relationship for the purposes of Inheritance laws and if they do not have a will, the intestacy rules can bite.
Whilst Nuptial Agreements may be considered by some to be unromantic, another view is that they are simply a sensible form of relationship planning. Nuptial Agreement should perhaps be considered more like an insurance policy, that you hope to never have recourse to rely on but can feel more secure in the knowledge that you have it in place.
I believe that society’s view of Nuptial Agreements has shifted in more recent years and with family dynamics often being complex, a Nuptial Agreement should be regarded as a precautionary measure which can offer some protection in the event of a relationship coming to an end.
As it stands, whilst it cannot be said that Nuptial Agreements are binding, the courts are unlikely to depart from such an Agreement, willingly entered into between two parties, in good time of the wedding/civil partnership, with full knowledge of one another’s assets and the benefit of legal advice, unless the agreement is fundamentally unfair. The court seeks to uphold the autonomy of private agreements willingly entered into and have concluded that there is no difference in legal status between pre and post Nuptial Agreements.
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