Definition of prenuptial agreements

Introduction

Sharp aptly provides a concise definition of prenuptial agreements reflected in both the case law and academic literature. He describes the prenuptial agreement as an agreement in contemplation of the failure of the relationship, seeking to legislate for the manner in which the parties financial resources should be disposed, what limitations should be imposed upon the parties to apply for the exercise of the court's discretion or what jurisdiction or forum they should submit to.

Current Position Of English Law—Cases And Statutes

At present, English law does not provide full recognition of prenuptial agreements, as prenuptial agreements cannot override judicial discretion with respect to the distribution of assets and financial provision post divorce. Although Wall J noted in S v S that English law does not provide full legal recognition to pre-nuptial agreements, he did concede that prenuptial agreements will be considered depending on the factual circumstances of the case in addition to all the circumstances under s. 25 of the Matrimonial causes act 1973. In other words, prenuptial agreements serve as a relevant consideration regarding the division of assets and financial provision, but “will not be the sole consideration”.

In this connection, LJ Thorpe's recent judgment in Radmacher v. Granatino acknowledged that subject to certain safeguards, a carefully constructed prenuptial agreement “should be available as an alternative to the stress, anxieties, and expense of a submission [for ancillary relief] to the width of judicial discretion”. LJ Thorpe's perspective affirms the view put forward by a report published by family law solicitor's group, Resolution, which argued that “pre-marital agreements should become legally binding and enforceable subject to a single overriding safeguard of significant injustice”. Thus, the purpose of this paper is to critically evaluate the arguments favouring and repudiating the notion that ‘much of the uncertainty and injustice surrounding financial provision and property distribution post divorce would be resolved by according full legal recognition to pre-nuptial agreements'. It is respectfully submitted that prenuptial agreements are likely to resolve some of the injustices and uncertainties that arise post-divorce, but this paper hesitates towards the idea of a wholesale adoption in favour of a cautious approach subject to certain safeguards; furthermore, this paper argues that although prenuptial agreements may initially reduce the costs of litigation thus alleviating some of the perceived uncertainty, prenuptial agreements could potentially lead to further litigation over the terms of the initial agreement consequently leading to greater uncertainty and potential injustice for litigants.

Affirmation Of Pre-Nuptial Agreements

Several themes emerge from the literature strongly opposing the current state of English law in relation to its perspective on prenuptial agreements. Morley explores the first theme in our analysis and suggests that because societal perceptions of marriage and the largely patriarchal acquisition of property have dramatically shifted, it is therefore incumbent upon the courts to re-consider the bar against prenuptial agreements in light of changing social attitudes. He cites significant statistical evidence that the United Kingdom's failure to fully recognise prenuptial agreements on the grounds of upholding the sanctity of marriage does not appear to provide a substantive justification for its rejection, as the UK divorce rate is higher in comparison to other EU countries acknowledging the legal validity of prenuptial agreements. McLellan notes that proponents of premarital contracts justify their arguments by highlighting the eroding influence of social institutions such as the church, community, and extended family; consequently, proponents contend that the law should adapt accordingly by affirming the ‘private ordering' of marriage contracts. Additionally, Cretney maintains that English law has utterly “failed to keep pace with economic realities”. In this connection, those in favour of reform observe that the acknowledgement of prenuptial contracts will also accommodate the diversity of relationships that currently exist, consequently affirming a couple's autonomy, privacy and freedom by employing agreements specifically tailored to meet their particular needs and desires.

Secondly, advocates of prenuptial agreements underscore the heightened level of uncertainty, confusion and unfairness in the present law. Morley notes that the unfairness and uncertainty regarding the enforcement of prenuptial agreements could lead to a disincentive for individuals to marry, especially in consideration of the financial risks one undertakes in the event of a divorce. Consequently, Clark stresses that legal reform recognising prenuptial contracts in English law is likely to promote a greater degree of confidence among legal practitioners in advising their clients and fostering a heightened degree of security amongst clients as a result of formally recognising their legal rights and responsibilities as initially agreed upon in the pre-nuptial contract. Similarly, Cretney argues that a significant advantage of drafting clear, legislative rules acknowledging the role of prenuptial agreements and its bearing upon the financial consequences upon divorce would enable directly affected parties to know the principles of the law, thus permitting practitioners to advise with greater clarity and precision. In this connection, it is also argued that the formal legal recognition of prenuptial agreements safeguards the couple and reduces uncertainty by mitigating the cost of litigation. For example, Morley emphatically asserts that “pre-nuptial agreements reduce litigation costs dramatically since there is far less need to litigate property division when the terms have already been agreed”.

Thirdly, proponents highlight that an affirmation of prenuptial agreements would not only foster a heightened sense of personal responsibility but also affirm the importance of the privacy and autonomy of a couple's relationship. Additionally, proponents also cite equality between couples as a rationale for recognising prenuptial agreements. For example, Attwood notes that the reluctance of the Pennsylvanian Supreme court's judiciary to interfere with a prenuptial agreement in the Simeone case was justified on the grounds that it would reinforce patriarchal views of socio-economic inequality between men and women. She writes,

The court reasoned that any greater interference with the parties' freedom of contract would necessarily embrace the view that spouses are of unequal status and that women are not knowledgeable enough to understand the nature of contracts they enter.

Consequently, advocates note that a refusal to enshrine prenuptial agreements into law is paternalistic, maintaining that the freedom of prenuptial contracts enables parties to “facilitate communication...by identify[ing] potential conflicts in advance... paradoxically...giving couples a greater sense of security”. Morley insists that a prenuptial contract enables couples “to take more responsibility for ordering their own lives...by encouraging them to look at the financial issues they may face as husband and wife before they get married”. He goes on to further state that since the English courts seem to acknowledge a marriage as a partnership, why then “should the courts prevent the partners from deciding on the terms of their partnership?” Cretney correspondingly asserts that if the aim of the law is to protect personal autonomy whilst balancing the certainty and predictability of the law with respect to the allocation of property upon divorce, it is crucial for the state to allow marriage partners to define the parameters and stipulations of their partnership.

Finally, perhaps the most trenchant criticism of English law is its failure to harmonise its law with other jurisdictions—that is, the nearly ‘universal international acceptance'—affirming the validity of prenuptial agreements. In S v S, Wilson J acknowledged that there are potential circumstances surrounding the prenuptial agreement which may be crucial in ancillary proceedings. He argued,

Where other jurisdictions, both in the United States and in the European Community, 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.

Likewise, Morley points out that the English refusal to recognise prenuptial agreements generates significant problems in international divorce cases. One of the most compelling arguments he raises is that the UK position ‘encourages forum shopping'. He writes,

A practitioner whose client is overseas, has substantial assets, is facing divorce and is party to a prenuptial agreement that is binding in the law of a current overseas matrimonial domicile will recommend that the client keep well away from Britain and institute a suit for divorce overseas with all possible speed. By contrast, the practitioner representing the other spouse will advise the client to do whatever is necessary to bring the case in England.

Similarly, Posnansky is puzzled by the UK's antiquated position in comparison with Canada, South Africa, most of the EU, Australia, the United States and even China. He thus contends that the UK's refusal to acknowledge prenuptial agreements is “inconsistent with the rights of mature adults of full capacity to make binding contracts”. We now turn to the responses in favour of the current position of English law.

A Response: Opposition To Pre-Nuptial Agreements

The fundamental points of contention between commentators arguing in favour of, and against, prenuptial agreements appear to rest on different assumptions concerning the nature of marriage. An American lawyer once remarked that pre-nuptial agreements are analogous to “poison pills. They infect a marriage from the beginning and it can fail for the very reason you might have expected”. In other words, the prenuptial agreement could be viewed as a ‘self-fulfilling prophecy' where the parties implicitly acknowledge that the marriage is doomed to fail from the outset. As Bridge notes, this is a gateway for a commercialised approach to marriage enabling spouses to contemplate the failure of their marriage before a failure actually materialises. In another example, McLellan notes that psychologically, the ‘contractualization of marriage' inhibits the development of trust within a marriage, breeds ‘instability' and ‘negative attitudes', gives rise to ‘impoverished consent', introduces the ‘morals of the marketplace', and denigrates the emotional basis of marriage. He argues that the reduction of marriages to mere contractual obligations dismiss the traditional ideals of marriage—namely trust, fidelity, “mutuality, reciprocity, and respect for individuality”. Similarly, Lewis highlights the complementary concerns of academic commentators who argue that an adoption of prenuptial agreements will prioritise ‘self-interested individualism' over a sense of the obligations, commitments and responsibilities inherent within marriage. Perhaps Glendon's poignant description of our social condition indicates the respective challenges for the law in regulating marriage:

...the lack of any firm and fixed ideas about what marriage is and should be is but an aspect of the alienation of modern man. And in this respect the law seems truly to reflect the fact that in modern society more and more is expected of human relationships while at the same time social conditions have rendered these relationships increasingly fragile.

In the same vein, a question that arises is to what extent has the development of the law in recognising prenuptial agreements in other jurisdictions contributed to and perpetuated the fragility of human relationships rather than strengthening them?

A second criticism arising in the literature is that prenuptial agreements contribute to more litigation, thus rendering the notion of predictability, certainty, fairness, and up-front reduction of litigation costs largely illusory. Citing the research of game theorists who conclude that the uncertainty of judicial outcomes could lead parties to settle cases before they reach the courts in order to achieve a more certain result, George et al note that the converse is also true. They contend:

Once parties know more clearly what benefit or disbenefit may flow from establishing certain facts or arguments, they may begin to calculate the odds and be incentivised to litigate where the predictable benefit of doing so makes the risk worthwhile. A move from the uncertainty of judicial discretion to the certainty of contract terms may thus encourage trials and reduce the number of settlements achieved in cases subject to the court's discretion.

In other words, rather than reducing the costs of litigation as Morley contends, an unintended consequence is that prenuptial agreements actually serve to induce litigation. Furthermore, George et al note that prenuptial agreements are wasteful—especially with respect to the couple who devises an agreement and does not divorce, or the couple who either prefers to settle their divorce cases or initiate court proceedings because the terms of the initial agreement were so manifestly unjust that reliance upon the agreement would be preposterous.

Thirdly, concerns over the inequality of bargaining power and unpredictable outcome of judicial decisions are strongly compelling arguments of either discouraging the full legal recognition of prenuptial contracts, or at least proceeding with caution. Cohen challenges the supposed symmetry of prenuptial contracts, underscoring that although prenuptial contracts promise the parties that there much is to be gained at the initial establishment of such agreements, a long-term imbalance ensues, placing women in a less favourable position. He argues that this is due to the notion that men obtain gains at the formation of the contract, and women gain much later. Likewise, McLellan argues that a prenuptial agreement will only reinforce the asymmetrical distribution of power, especially in consideration of the problems women encounter with such examples as domestic violence, the inequality of financial provisions post divorce, and unfavourable position in the labour market. George et al also note that Hale's comments in MacLeod v MacLeod encouraging “the development of more egalitarian principles of financial and property adjustment on divorce” may be jeopardised since prenuptial agreements could potentially operate against women who represent the majority of child carers in marriages thus undermining the recognised value of child care. Additionally, others have highlighted that prenuptial agreements may simply be reduced to an overly commercialised approach, failing to accommodate the changes throughout a marriage. Clark observes that “if pre-nuptial contracts were to be made binding, to what extent would the courts retain the discretion, in the light of changed circumstances, to alter such contracts?” Furthermore, George et al argue that the proposal to fully recognise prenuptial agreements unless significant injustice is established pose considerable difficulties relating to definitions of ‘fairness' and ‘justice' claimed by parties involved in divorce proceedings. Consequently, broadly construed definitions of injustice may contribute to heightened legal uncertainty and complexity.

Finally, we briefly consider the public policy arguments discouraging the adoption of prenuptial agreements. Alexander points out that the state has a vital interest in the regulation of marriage. He argues that marriage cannot simply be reduced to a strictly private matter not only because of the vital public interest relating to the protection of children, but also because of how marriage serves as a fundamentally important social structure. Bridge also acknowledges that prenuptial agreements could potentially place a substantial burden on the foresight of lawyers in divorce proceedings, and echoes similar concerns with Herring by contemplating the possibilities of the state being unnecessarily burdened as a result of contractual agreements severely limiting a spouse's financial liability.

Analysis And Concluding Remarks

It is imperative that proponents of the full legal recognition of prenuptial agreements carefully consider the objections noted above. This paper cautiously affirms the importance of prenuptial agreements and finds the arguments for the harmonisation of English law with other jurisdictions most compelling.

However, a caveat must be employed, underscoring that the legislation of prenuptial agreements justifies greater state regulation, especially considering the potential that spouses adopting prenuptial agreements may lack sufficient understanding of the economic rights they are relinquishing. This could be remedied by legislation ensuring that premarital contracts conform to general principles of contract law, as well as Barton's similar call with the 1991 Family Law Committee's admonition that parties have mandatory legal representation. This could also be taken a step further by adopting Attwood's argument that couples seeking to enter premarital contracts ought to be held to a fiduciary standard. Additionally, it would be useful to adopt George's et al., contention that the term ‘injustice' be more clearly and precisely defined. Furthermore, George's contention of the potential wastefulness of prenuptial agreements ought to be heeded. Finally, advocates of prenuptial agreements ought to address the concerns of legal practitioners over professional liability upon formally recognising prenuptial agreements.

Were it not for the strength of, and weight given to the arguments in favour of harmonising UK law with other jurisdictions in recognising prenuptial agreements, it is likely that this paper would assert the contrary by affirming the current position of English law.

This paper has carefully considered the arguments in favour of, and opposed to the full legal recognition of prenuptial agreements; for the reasons cited in the above analysis, it acknowledges that prenuptial agreements ought to be affirmed, albeit with some reservation.

Bibliography

Cases

Crossley v Crossley [2008] 1 FCR 323

K v K [2002] Fam Law 877

MacLeod v. MacLeod [2009] 3 WLR 437

Radmacher v. Granatino [2009] EWCA Civ 649

S v S [1997] 2 FLR 100

US Case

Simeone v Simeone, 581 A .2d 162 (Pa. 1990)

Statutes

Matrimonial Causes Act 1973 (c.18) s.25

Journals

Alexander, G.S. “The New Marriage Contract and the Limits of Private Ordering”. Indiana Law Journal. Vol 73 (1998), 503-510.

Attwood, B.A. “Ten Years Later: Lingering Concerns about the Uniform Premarital Agreement Act”. Journal of Legislation. Vol 19 (1993), 127-154.

Barton, C. “Domestic Partnership Contracts: Sliced Bread or a Slice of the Bread?” Family Law. Vol 38 (2008), 900-908.

Bridge, S. “Marriage and Divorce: The Regulation of Intimacy” in Herring J. (ed). Family Law: issues, Debates, Policy. Cullompton: Willan (2001), p. 8.

Clark, B. “Should Greater Prominence Be Given to Pre-Nuptial Contracts in the Law of Ancillary Relief?” Child and Family Law Quarterly. Vol 16, no. 4. (2004), 399-407.

Cretney, S. “The Family and the Law—Status or contract?” Child and Family Law Quarterly. 403-414

Douglas, G. “Case Reports: Ancillary Relief”. Family Law. Vol 39 (2009), 789-790.

Fehlberg, B and Smyth, B. “Binding Pre-nuptial Agreements in Australia: the First Year”. International Journal of Law, Policy and the Family. vol. 16, no. 1, 127-140.

Francis, N. “New Light on Prenuptial Agreements”. Family Law. Vol 33 (2003), 164-168.

George, R.H., Harris, P.G., and Herring, J. “Pre-Nuptial Agreements: For Better or for Worse?” Family Law. Vol 39 (2009), 934-938.

Hatwood, M. “NA v MA: When is an Agreement Not an Agreement?” Family Law. Vol 37 (2007), 1020-1023.

Herring, J. “Why financial orders on Divorce should be unfair”. International Journal of Law, Policy and the Family. Vol 19, no. 2 (2005), 218-228.

Lewis, J. “Debates and Issues Regarding Marriage and Cohabitation in the British and American Literature”. International Journal of Law, Policy and the Family. vol. 15 (2001), 159-184.

McLellan, D. “Contract Marriage—The Way Forward or Dead End?” Journal of Law and Society. Vol 23, no. 2. (1996). 234-246.

Morley, J.D. “Enforceable Pre-nuptial Agreements: The World View”. International Family Law Journal. (2006), p. 195, located at http://www.international-divorce.com/england_-_prenuptial.htm <accessed 6 November 2009>.

Posnansky, J. “Talking Shop: A Time for Change: A Personal View”. Family Law. Vol 37 (2007). 442-444.

Sharp, C. “Pre-nuptial agreements: A Rethink Required”. Family Law. Vol 38 (2008), 741-750.

Further Reading

Ramseyer, M.J. “Toward Contractual Choice in Marriage”. Indiana Law Journal. Vol 73 (1998), 511-516.

M v M (Prenuptial Agreement) [2002] Fam Law 177

N v N [1997] 1 FLR 900

Uddin v. Ahmed [2001] 3 FCR 300.