Law Articles

Pre-nuptial agreements. One step closer to being legally binding? 08/11/2010

Financial uncertainty is one of the most stressful elements of any divorce, and a pre – nuptial agreement can be a useful tool for couples wishing to reduce this uncertainty. Until October 2010, the enforceability of pre-nuptial agreements has been very uncertain because they were seen as contrary to public policy and an attempt to override divorce laws.

That principle has now been swept away with the judgement in Radmacher v Granatino (October 2010) which paves the way for these agreements to become more mainstream. Pre –nuptial agreements are still not binding in law. Only Parliament can do that, and probably will, following the Law Commission proposals expected in early 2011. However, for now, we can rely on the judgement made in Radmacher.

So what is the current position regarding pre-nuptial agreements in England and Wales? Well, the answer is as follows:

“The court should give effect to pre-nuptial agreements that have been 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 the agreement”.

Although full guidance was not provided about when the terms of a pre-nuptial agreement would not be fair, the court did set out the following:

• A pre-nuptial agreement will not be allowed if it will prejudice the reasonable requirements of any children of the family;
• Where duration of the marriage renders what was once fair, now unfair;
• Where the terms of the pre-nuptial agreement fail to meet the needs of the receiving party or properly compensate him or her for any financial disadvantage caused by the relationship.

Interestingly, the reference by the Supreme Court to ‘fairness’ has nothing to do with whether the terms of the agreement are fair, but rather it relates to the circumstances in which those terms were agreed. This would include the issue of whether or not one of the parities entered the agreement under duress, whether there was knowledge of financial disclosure, and whether the parties knew that they were free to negotiate freely and fairly through independent legal representation.

To ensure that the a pre –nuptial agreement is upheld by the court, both parties should provide each other with financial disclosure, obtain independent legal advice, and not enter into such an agreement less than 21 days before the marriage.

The Supreme Court, in the case of Radmacher, also overturned the decision made by the Privy Council in MacLeod (2008) and confirmed that the status of pre- and post- nuptial agreements are now the same which means there is no longer a need to transfer the terms of a pre-nuptial agreement to a post- nuptial agreement as was the case before.

With second marriages on the rise, people marrying later, and many couples entering marriage with money and property already to their name, it is likely that there will be more and more demand for pre-nuptial agreements, especially now that the issue of their enforceability has been clarified by Radmacher.

For further information and advice on this issue, and other family law issues, please contact us for a free initial consultation on 01992 306 616 or 0207 956 2740 or email us.