Present and future laws on prenuptial agreements – will they or won’t they stand up in court?

10 April 2017

The debate on prenuptial agreements continues in earnest although the government shows no sign of addressing the complexities and pitfalls in relation to their enforceability. During his address to the University of Bristol Law Club on 22 March 2017, Supreme Court Justice Lord Wilson of Culworth raised the topic of prenups once again, suggesting that the current state of affairs may be inappropriately intrusive and in need of government review.

Prenups (and postnups) can be an important consideration for those with significant inheritance prospects, previously acquired wealth or for those who are remarrying. They appear to be growing in popularity, and it is for this reason that clarity in the form of legislation would help to ensure a greater chance of enforceability. However in the meantime, ensuring that prenups are undertaken with careful planning should be a priority, and may prove crucial further down the line if the relationship was to break down.

While we await further legislative clarification on the position of prenups, here is a reminder about their current status under English law.

What is a prenuptial agreement and is there any point in entering into one?

There is no specific legislation about prenuptial agreements, so their status has been determined by case law – most notably in the landmark Supreme Court case of Radmacher v Granatino (of which see more below).

As the law currently stands, prenuptial agreements are not automatically legally binding in England and Wales. However, it is not all bad news – if done properly, prenuptial agreements should be upheld in the future and can be used to protect pre-acquired wealth, family assets or future inheritances, or simply to provide the couple with certainty about what would happen if their relationship was to break down.

The case of Radmacher v Granatino [2010] UKSC 42 provided the first significant judgment about the status of prenuptial agreements. The Supreme Court set out the following three factors that increase the likelihood of a prenuptial agreement binding the parties:

  1. The agreement must be freely entered into;
  2. The parties must have a full appreciation of the implications of the agreement; and
  3. It must not be unfair to hold the parties to their agreement in the circumstances prevailing.

I have explained what each of these factors mean in practice below.

  1. The agreement must be freely entered into

    It is important that each party gets independent legal advice. Taking independent legal advice will go some way to proving to the court that an individual was fully aware of the terms of the agreement and therefore freely entered into it, particularly if warnings were raised at the outset. In the case of DB v PB [2016] (discussed further below), the wife’s assertion of misrepresentation failed since she had received independent legal advice in the USA (in fact telling her not to sign the agreement).

    A person’s emotional state at the time of making the agreement is also relevant to whether they entered into the agreement of their own free will, without undue influence or pressure.  The individual’s age and maturity is also taken into account. Timing is equally an important factor – signing the prenup just before the marriage increases the risk that one party will be seen as putting undue pressure on the other.
     
  2. The parties must have a full appreciation of the implications of the agreement

    It is important that there is an exchange of financial disclosure before the prenup is signed so that each party is aware of the extent of the claims they may potentially be giving up. In a case where one party has substantial pre-acquired wealth and wishes to ring-fence this, he or she will have the best chance of doing so if their partner is fully aware of the assets and how much they are worth before they sign the prenup.
     
  3. It must not be unfair to hold the parties to their agreement in the circumstances prevailing

    It is this concept of fairness that has caused much debate about how much prenups should offer the financially-weaker party in order to avoid being disregarded. The court has broad discretion in financial remedy proceedings and at an absolute minimum will seek to ensure that both parties’ needs (and in particular the financially weaker party) and the needs of any children of the family will be met. It is therefore important that the agreement meets this requirement to stand any chance of being upheld.

    As a general indication, the longer the marriage, the lower the chance of upholding the prenup, as they become “stale”, particularly if there have been significant or unforeseen changes in circumstances.

What factors are likely to be relevant for enforceability?

The Supreme Court has confirmed that the concept of fairness in financial remedy applications follows three principles: need, compensation and sharing. The very existence of a prenuptial agreement is capable of altering what is seen as fair in the circumstances.

It will not be seen as fair to allow a prenuptial agreement to prejudice the reasonable requirements of a child of the family. That being said, the autonomy of the individuals who entered into the agreement should also be respected, and the courts have held that there is nothing inherently unfair about an agreement which seeks to ring-fence non-matrimonial property.

International considerations

A number of our international couples will have entered into prenuptial arrangements abroad (sometimes also known as ‘matrimonial property regime’) before coming to the UK, or they may be considering an agreement which encompasses a number of their foreign assets. In these instances, it is very important to consider jurisdictional issues and potentially include both clauses choosing your jurisdiction and law. Again, the aim is to provide certainty in the future, in this case over how (and where) the agreement will be interpreted by a court.

In the case of DB v PB [2016], the High Court was restricted in its discretion by the existence of valid prenuptial agreements (in this case the parties had two signed in Sweden and one signed in America). The prenups contained clauses confirming that the Swedish courts would have jurisdiction. While the judge deemed the agreement unfair to the wife, he stated that it should not simply be “ripped up” as the courts should respect the parties’ autonomy. He was also unable to make a maintenance order (as the English court did not have jurisdiction) and the terms of the prenup did not allow him to make a sharing award.

A case for reform?

In February 2014 the Law Commission published its report on Matrimonial Property Needs and Agreements (see our blog on the topic here). The Commission recommended the introduction of qualifying nuptial agreements and even appended a draft Nuptial Agreements Bill to the report, which would give nuptial agreements the status of enforceable contracts, provided certain procedural safeguards were met. Importantly however, qualifying agreements could not be used by parties to contract out of meeting the financial needs of each other and of any children. The Government acknowledged the recommendations, but as yet have not got any further in implementing any reform. The case for reform may have now been overtaken by the changing landscape that Brexit will bring to the family law arena, but it is important that practitioners do what we can in order to ensure that it remains on the agenda.  

Further information

If you have any questions about the issues covered in this blog, please contact a member of our family team.

You may also be interested in reading our 10 point guide to prenuptial agreements and our other previous blogs on prenuptial/postnuptial agreements.

Choose a specialist area:

Prenuptial Agreements - Frequently Asked Questions

Drawing on our experience, we have answered some frequently asked questions around prenuptial agreements.

International Prenuptial Agreements

We have wide experience of drafting prenuptial agreements (and postnuptial agreements) for a range of international clients including international families, expatriate professionals, celebrities, high net worth entrepreneurs and individuals all of whom have foreign connections.

Prenuptial Agreements

Prenuptial agreements are increasingly being upheld by the Courts and it is essential that you sign up expecting to be bound by it. If you are being asked to sign an agreement, you will need to understand the rights you are giving up by entering into it.

Postnuptial Agreements

Many couples also choose to have a postnuptial agreement when they are relocating to the UK and at least one out of the couple want to protect their assets in the event of a future English divorce. We regularly advise clients in relation to postnuptial agreements, whether freestanding or following a prenuptial agreement or foreign marriage contract.

Pre Civil Partnership Agreements

Civil partnerships for gay couples came into force in 2005 and since then, we have prepared a high number of pre-civil partnership agreements ("pre-cips") on behalf of clients.

Getting Married

Couples marrying or entering a civil partnership often don’t consider how their legal obligations will change. We can prepare agreements to provide them with certainty about their financial rights and obligations if the relationship should break down.

Financial Arrangements on Divorce

A number of factors are taken into account when considering financial arrangements on divorce. Our lawyers are experts in advising on and negotiating financial settlements for our clients.

International Families

Our expert team of lawyers can help you plan for and protect all of your interests and affairs as you are on the move.

Moving to the UK

Making your home in another country can be complicated. We’ll help simplify the process.

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