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What Is A Prenuptial Agreement

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					                  Pre-nuptial agreements
                  Standard Note:     SN/HA/3752
                  Last updated:      17 October 2008
                  Author:            Catherine Fairbairn, Home Affairs Section




Pre-nuptial (or pre-marital) agreements, in which, before they get married, couples set out
how they wish their assets to be divided in the event of divorce, are not automatically
enforceable in courts in England and Wales. However, there have been calls for pre-nuptial
agreements to be made legally binding. Furthermore, some recent cases have indicated
that, in relevant circumstances, judges may be prepared to attach weight to pre-nuptial
agreements when exercising their discretion regarding the division of assets on divorce.
Nevertheless, the courts are not obliged to give effect to all pre-nuptial agreements. In
December 2004, the Government stated that it had no plans to legislate to make pre-nuptial
agreements legally binding. The Law Commission has recently announced that it is to
review the enforceability of pre-nuptial agreements




Contents

1    What is a pre-nuptial agreement?                                                       2

2    The current status of pre-nuptial agreements                                           2
     2.1   The courts’ discretion over the division of assets on divorce                    2
     2.2   Some recent cases                                                                2
     2.3   Parliamentary questions                                                          4
     2.4   Ten minute rule bill                                                             6

3    The Government’s consultation paper, Supporting families                               6
     3.1   The consultation paper                                                           6
     3.2   Responses to the consultation paper                                              7

4    Law Commission project                                                                 7




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and is not intended to address the specific circumstances of any particular individual. It
should not be relied upon as being up to date; the law or policies may have changed since it
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online or may be provided on request in hard copy. Authors are available to discuss the
content of this briefing with Members and their staff, but not with the general public.
1        What is a pre-nuptial agreement?
A pre-nuptial agreement is an agreement made by a couple before they marry which sets out
how they wish their assets to be divided if they should divorce. The agreement may be
updated after the marriage as the couple’s circumstances change.

2        The current status of pre-nuptial agreements
Pre-nuptial agreements are legally binding in various countries including the USA and
Australia. However, they are not automatically enforceable in courts in England and Wales.

2.1      The courts’ discretion over the division of assets on divorce
Under section 25 of the Matrimonial Causes Act 1973, the court has very wide discretion
regarding the division of assets on divorce. This section provides that the court must take
into account all the relevant circumstances of the case and particularly the matters set out in
the section, priority being given to the welfare, while a minor, of any child of the family who
has not attained the age of eighteen. In some cases, a pre-nuptial agreement may be
considered as one of the circumstances to be taken into account by the court or as a factor
to be treated as conduct which it would be unfair for the court to ignore (this is one of the
matters specified in section 25).

Pre-nuptial agreements have traditionally been unenforceable as being against public policy.
This is because they might undermine the institution of marriage and attempt to fetter the
discretion of the courts to award property on divorce. In one case, Thorpe J. (as he then
was) confirmed the very limited significance of pre-nuptial agreements:

         In this jurisdiction they must be of very limited significance. The rights and
         responsibilities of those whose financial affairs are regulated by statute cannot be
         much influenced by contractual terms which were devised for the control and limitation
         of standards that are intended to be of universal application throughout our society. 1

2.2      Some recent cases
However, in some cases, courts have been prepared to attach weight to a pre-nuptial
agreement as one of the relevant circumstances to be taken into account in exercising their
discretion. In one case, the judge expressed the view that in the future, the circumstances
surrounding a pre-nuptial agreement might prove crucial:

         But there will come a case ... where the circumstances surrounding the prenuptial
         agreement and the provision therein contained might, when viewed in the context of
         the other circumstances of the case, prove influential or even crucial. Where other
         jurisdictions, both in the USA and in the European Union, have been persuaded that
         there are cases where justice can only be served by confining parties to their rights
         under prenuptial agreements, we should be cautious about too categorically asserting
         the contrary. I can find nothing in s 25 to compel a conclusion, so much at odds with
         personal freedoms to make arrangements for ourselves, that escape from solemn
         bargains, carefully struck by informed adults, is readily available here. 2

In another case, the judge held that “the fact that the parties have made their own agreement
is a 'very important' factor in considering what is the just and fair outcome. The amount of


1
    F v. F (Ancillary Relief: Substantial Assets) [1995] 2 F.L.R. 45 at 66
2
    S v S {1997] 2 FLR 100 at 103 (Wilson J)



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importance will vary from case to case”. (In that case the agreement was made after the
marriage and in anticipation of divorce). He continued:

        The court will not lightly permit parties who have made an agreement between
        themselves to depart from it. The court should be slow to invade the contractual
        territory, for as a matter of general policy what the parties have themselves agreed
        should, unless on the face of it or in fact contrary to public policy or subject to some
        vitiating feature ... be upheld by the courts.

        A formal agreement, properly and fairly arrived at with competent legal advice, should
        be upheld by the court unless there are 'good and substantial grounds' for concluding
        that an 'injustice' will be done by holding the parties to it...

        The mere fact that one party might have done better by going to court is not of itself
        generally a ground for permitting that party to resile from what was agreed.

        The court must none the less have regard to all the circumstances. The circumstances
        are to be judged in their totality and with a broad perspective rather than individually
        one by one.

        In particular the court must have regard to the circumstances surrounding the making
        of the agreement, the extent to which the parties themselves attached importance to it
        and the extent to which the parties themselves have acted upon it.

        The relevant circumstances are not limited to the purely financial aspects of the
        agreement: social, personal and, I would add, religious and cultural considerations, all
        have to be taken into account.

        The court should bear in mind the undesirability of stirring up problems with parties
        who have come to an agreement.

        On the contrary the court should if possible, and consistent with its duty under s 25,
        seek to bring about family peace and finality. 3

More recently, a court largely upheld a pre-nuptial agreement on the basis that the wife (who
was seeking a capital settlement in excess of that set out in the agreement) understood the
pre-nuptial agreement, was properly advised as to its terms, and signed it willingly without
pressure. There had been no unforeseen circumstances arising since the agreement which
would make it unjust to hold the parties to it. It was held, therefore, that the agreement
should be considered by the court as one of the circumstances of the case under section 25
of the Matrimonial Causes Act 1973 and that entry into the agreement constituted conduct
which it would be inequitable to disregard. 4

Conversely, in another case, a prenuptial agreement was disregarded on the particular facts
involved. The judge said:

        Nowadays [the existence of a prenuptial agreement] can be of some significance but
        not in this case. This contract was signed on the very eve of the marriage, without full
        legal advice, without proper disclosure and it made no allowance for the arrival of
        children. It must, in my judgment, fall at every fence, quite apart from the fact that the




3
    X v X (FD) [2002] 1 FLR 508 at 537 (Munby J)
4
    K v K (Ancillary relief: prenuptial agreement) [2003] 1 FLR 120 (Roger Hayward-Smith QC (sitting as a Deputy
    High Court Judge)



                                                       3
        terms were obviously unfair, preventing the wife from claiming against the husband’s
        assets. 5

In 2006, Mrs Justice Baron considered the legal position in relation to contracts between
spouses:

        It is an accepted fact that an agreement entered into between Husband and Wife does
        not oust the jurisdiction of this Court. For many years, agreements between spouses
        were considered void for public policy reasons but this is no longer the case. In fact
        over the years, pre nuptial "contracts" have become increasingly common place and
        are, I accept, much more likely to be accepted by these Courts as governing what
        should occur between the parties when the prospective marriage comes to an end.
        That is, of course, subject to the discretion of the Court and the application of a test of
        fairness/manifest unfairness. It may well be that Parliament will provide legislation but,
        until that occurs, current Authority makes it clear that the agreements are not
        enforceable per se although they can be persuasive (or definitive) depending upon the
        precise circumstances that lead to their completion. 6

In that particular case, however, the prenuptial agreement was not upheld because of the
husband’s undue pressure and undue influence.

In 2007, the Court of Appeal ruled that a divorce case should be heard by a rabbinical court
in Israel under the terms of a prenuptial agreement. The wife had petitioned for dissolution of
the marriage in London. The Court of Appeal upheld an earlier ruling and said that the judge
was right to regard the pre-nuptial agreement as a major factor in her decision. 7

In another case in 2007, the Court of Appeal held that a judge had a discretionary power in
ancillary relief (financial provision) proceedings to require a party to show good cause why a
prenuptial agreement should not govern the division of assets on the dissolution of the
marriage. Lord Justice Thorpe said:

        if ever there is to be a paradigm case in which the court will look to the prenuptial
        agreement as not simply one of the peripheral factors in the case but as a factor of
        magnetic importance, it seems to me that this is just such a case. 8

2.3     Parliamentary questions
The Government’s position on pre-nuptial agreements was set out in December 2004 in a
series of written answers by David Lammy, then Parliamentary Under-Secretary of State,
Department for Constitutional Affairs (as it was then, now the Ministry of Justice), confirming
that the Government had no plans to legislate to make pre-nuptial agreements legally
binding:

        Dr. Kumar: To ask the Parliamentary Secretary, Department for Constitutional Affairs
        what estimate he has made of the percentage of divorce cases in which a prenuptial
        agreement is enforced in court.

        Mr. Lammy: Pre-nuptial agreements are not legally enforceable at present, but the
        courts may consider the terms of such agreements when exercising their discretion in

5
    J v V (Disclosure: Offshore Corporations) [2004] 1 FLR 1042
6
    NA v MA [2006] EWHC 2900 (Fam)
7
    Ella v Ella [2007] EWCA Civ 99
8
    Crossley v Crossley 19 December 2007, Times Law Reports 3 January 2008,
    http://business.timesonline.co.uk/tol/business/law/reports/article3123550.ece (at 16 October 2008),
    [2007] EWCA Civ 1491, http://www.bailii.org/ew/cases/EWCA/Civ/2007/1491.html (at 16 October 2008)



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        relation to the division of property on divorce. Figures on the number of cases in which
        the courts exercise their discretion in this way are not collected. Anecdotal evidence
        suggests that the cases where pre-nuptial agreements are an issue are rare.

        Dr. Kumar: To ask the Parliamentary Secretary, Department for Constitutional Affairs
        what assessment he has made of the consequences for court time and costs of
        making prenuptial agreements binding.

        Mr. Lammy: No assessment has been made. However, anecdotal evidence suggests
        that pre-nuptial agreements are rarely an issue in ancillary relief cases. It is, therefore,
        doubtful that any savings in court time or costs would be significant.

        Dr. Kumar: To ask the Parliamentary Secretary, Department for Constitutional Affairs
        whether he plans to make prenuptial agreements legally binding except where
        upholding an agreement would cause significant injustice.

        Mr. Lammy: At present, couples are free to enter into pre-nuptial agreements, and
        abide by their terms on divorce, if they wish to do so. The courts can consider the
        terms of such agreements when exercising their discretion regarding the division of
        property on divorce. The Government believes that there would be difficulties in tying
        people into agreements made years before a divorce. The Government also believes
        that binding agreements would carry a significant risk of unfairness to either party in
        the event of a change in financial or other circumstances during the course of the
        marriage. The Government, therefore, have no plans to legislate to make pre-nuptial
        agreements legally binding. 9

In July 2007, in a further written answer, the Government stated that it considered that pre-
nuptial agreements could never fully oust the jurisdiction of the court without putting
vulnerable parties and children at risk:

        Mr. Heald: To ask the Secretary of State for Justice (1) what his Department's policy is
        on pre-nuptial agreements; and what representations his Department has received
        from the hon. Member for Grantham and Stamford on this issue;

        (2) whether his Department has made any assessment of the impact of pre-nuptial
        agreements on (a) low income and (b) vulnerable individuals.

        Bridget Prentice: Couples are free to make pre-nuptial agreements and apply them in
        the event of relationship breakdown. In those circumstances the courts will only
        intervene in their financial affairs if one party wishes to dispute that agreement. Even if
        the parties dispute it, an agreement is a factor taken into account in any ancillary relief
        proceedings relating to the couple who made the agreement.

        The welfare of any child is the court's first consideration when resolving a couple's
        financial affairs. Enforcement of prenuptial contracts regardless of their content would
        displace that principle. An agreement which is very old, or one which does not deal
        with the couple's current circumstances, or on which the parties had not taken
        independent legal advice, could be unfair. The agreement might not have considered
        changes in circumstances, such as the illness of one of the parties, or the birth of
        children, which would change the parties' earning capacity.

        This Ministry has not received any representations from the hon. Member for
        Grantham and Stamford on this issue to date.



9
    HC Deb 20 Dec 2004 c 1391W



                                                     5
         The Ministry has not undertaken research on the impact of pre-nuptial agreements on
         parties with low incomes and vulnerable individuals. However, we believe that pre-
         nuptial agreements are most often used by wealthier couples. We think that pre-nuptial
         agreements could never fully oust the jurisdiction of the court without putting vulnerable
         parties and children at risk. 10

2.4      Ten minute rule bill
In July 2007, Quentin Davies introduced, under the ten minute rule, a Bill to provide for the
enforceability of pre-nuptial agreements. 11 The Bill did not proceed any further.

3        The Government’s consultation paper, Supporting families
3.1      The consultation paper
In 1998, the Government published a consultation paper, Supporting families which
considered practical steps that could be taken to support families. 12 In the consultation
paper, the Government acknowledged that couples might be discouraged from making
pre-nuptial agreements by the fact that there is no requirement for the courts to take any
account of such agreements in deciding how to award property on divorce. 13 The
Government stated that one of the proposals it was considering was whether to “make ‘pre-
nuptial’ written agreements about the distribution of money and property legally binding, for
those who wish to use them”. 14 The Government set out its reasons for considering making
pre-nuptial agreements enforceable, including that they might give the public more choice,
enable them to take more responsibility for their own lives and that they might make it more
likely that couples would marry:


         4.21 The Government is considering whether there would be advantage in allowing
         couples, either before or during their marriage, to make written agreements dealing
         with their financial affairs which would be legally binding on divorce. This could give
         people more choice and allow them to take more responsibility for ordering their own
         lives. It could help them to build a solid foundation for their marriage by encouraging
         them to look at the financial issues they may face as husband and wife and reach
         agreement before they get married.

         4.22 Providing greater security on property matters in this way could make it more
         likely that some people would marry, rather than simply live together. It might also give
         couples in a shaky marriage a little greater assurance about their future than they
         might otherwise have had. Nuptial agreements could also have the effect of protecting
         the children of first marriages, who can often be overlooked at the time of a second
         marriage - or a second divorce.

However, the Government stressed that pre-nuptial agreements would not be made
compulsory for couples intending to marry and that the interests of a party to the agreement
who is economically weaker and the interests of children would be protected by means of six
specified safeguards. 15 The Government asked for views on “the desirability of allowing

10
     HC Deb 10 July 2007 c1465W
11
     HC Deb 3 July 2007 c834-65
12
     Supporting families, November1998,
     http://web.archive.org/web/20030417135726/http://www.homeoffice.gov.uk/docs/sfpages.pdf
     (at 16 October 2008)
13
     At para 4.20. p33
14
     At para 4.12, p31
15
     At para 4.23, p33



                                                      6
couples to make written agreements dealing with their financial affairs on divorce and as to
the safeguards which would lead to an agreement not being legally binding.” 16

3.2      Responses to the consultation paper
In 1999, the Government published a summary of responses to the consultation paper. 17
Responses to the question about pre-nuptial agreements were fairly evenly divided - 80
respondents agreed it would be helpful to allow pre-nuptial agreements to be legally binding
and 77 felt that this would foster negative expectations on the part of those contemplating
marriage. 18 The Government quoted the response from the Women’s National Commission
as being illustrative of those expressing reservations:

         Our member organisations have mixed views on the concept of a pre-nuptial
         agreement. Where support was expressed it was muted, with doubts as to the value of
         a document that does not reflect changes in circumstances that occur after marriage. It
         was also commented that, if the value of the agreement is in the reduction of conflict
         on a break-up, this is most valuable where there are children of the marriage. But this
         is a circumstance where the agreement would not be binding. One organisation
         expressed support for the proposal with the safeguards described in the consultation
         document. Several organisations were more vehemently against the proposal,
         particularly because of the perception that this would imply countenancing the break-
         up of a marriage before the marriage contract had been entered into. 19

There has been no legislation following this consultation exercise to make pre-nuptial
agreements legally enforceable.

4        Law Commission project
The Law Commission has recently announced a project which will examine the enforceability
of pre-nuptial agreements made between spouses or civil partners (or those contemplating
marriage or civil partnership) concerning their property and finances:

         The legal recognition of marital property agreements is of great social importance.
         Relationship breakdown remains a significant phenomenon and financial and property
         disputes between separating spouses and civil partners often lead to distress and
         expense for all involved. There is a view that the fact that pre-nuptial agreements are
         not currently binding may deter people from marrying or entering into civil partnerships
         in some cases. The issue may be of particular importance to those who have
         experienced divorce and wish to protect their assets, however extensive, from a future
         claim for ancillary relief. It may also be crucial for couples who have entered into
         marital property agreements in jurisdictions in which such agreements are
         enforceable. 20

This project is due to commence in late 2009, with a report and draft Bill expected in late
2012.




16
     Q15, p38
17
     http://www.homeoffice.gov.uk/documents/sfamr.pdf?view=Binary (at 16 October 2008)
18
     Para 4.6, p23
19
     Ibid, pp23-4
20
     http://www.lawcom.gov.uk/marital_property.htm (at 16 October 2008)



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