01 March 2007

Family news - spring: Prenuptial agreements

The English court must consider certain statutory factors when deciding how financial resources should be divided upon divorce, but the system is essentially a discretionary one.  Whilst this enables the English courts to deal with hugely different individual circumstances, it also means that it is difficult for an individual to have certainty as to what to expect in the event of a divorce.  Recent cases have muddied the waters further by introducing new concepts such as “compensation”.

Many individuals keen to achieve some certainty seek to do this through a prenuptial agreement.  However, despite their widespread use in much of Europe, prenuptial agreements are not specifically dealt with in our current legislation and are therefore not binding.

So, is there any point in entering into a prenuptial agreement?  If you are (or are acting for) the financially stronger party the answer is most certainly “yes”.  This is for two main reasons:

  • If an Agreement is entered into in the right way, it is very likely to make a difference to the outcome on divorce; and
  • the law is constantly evolving and most English practitioners expect the enforceability of prenuptial agreements to increase in the future.

English law requires Judges to consider ‘all of the circumstances of the case' and ‘conduct which it would be inequitable to ignore'.  Prenuptial agreements can fall into either of these categories.  The most significant decision on the subject is the 2003 of K v K.

The husband and wife, who had one child, separated after 14 months of marriage.  The wife had discovered that she was pregnant and, at the wife's mother's insistence, the parties had then married.  They entered into a prenuptial agreement at the instigation of the wife's father. 

It was decided that the wife should receive a lump sum of £120,000 in accordance with the agreement.  She had understood the agreement, she had been properly advised as to its terms, and had signed it willingly without pressure.  There had been no unforeseen circumstances arising since the agreement that would make it unjust to hold the parties to it.  It was a short marriage. 

However, the judge decided that it would be unfair to prevent the wife from making a claim for maintenance because of the ongoing contribution she was making in caring for the child of the marriage.

The main elements that a prenuptial agreement must satisfy in order to have an impact are as follows:

  • Both parties must have independent legal advice.
  • The terms of the agreement must provide for an outcome that would be within the Court's contemplation to order.
  • There must be full disclosure.
  • The Agreement must be made sufficiently before the wedding to ensure that there can be no suggestion that either party was under any pressure to enter into it.

It is widely thought that in the not too distant future, the law will give prenuptial agreements that are entered into properly even further weight, although it is still likely that the Courts will wish to retain some discretion to depart from the terms of an agreement.  In light of the unusual relationship that exists between a husband and wife as parties to a contract, this would seem sensible.  It is certainly the case that judges are increasingly recognising that the way a couple have run their lives may be taken into account in deciding how their resources should be shared.

Our view therefore remains that those financially stronger parties considering marriage should certainly consider entering into a prenuptial agreement. 

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