A nuptial agreement is an agreement in writing entered into by two parties prior to, or after, their marriage or entry into a civil partnership, which records how they wish their finances to be treated and distributed in the event that they should separate or divorce, or have their civil partnership dissolved.
Is a nuptial agreement legally binding?
Historically, it was contrary to public policy for married couples, or couples about to get married, to make an arrangement which provided for the contingency that they might separate. However, attitudes have changed over the years and in October 2010, the Supreme Court in the reported case of Radmacher v Granatino [2010] UKSC 42 held that in the case of both pre-nuptial agreements and post-nuptial agreements:
“The Court should give effect to a nuptial agreement that is 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 their agreement.” [Paragraph 75]
Notwithstanding the Supreme Court’s ruling, nuptial agreements are not binding in the sense of being enforceable contracts; nor are they permitted to prevent the Court from exercising its jurisdiction to make financial orders on a divorce or dissolution of a civil partnership. However, agreements which are properly being entered into are now recognised by the Divorce Courts in England and Wales and significant weight is being given to them in any financial claims on divorce, or, on the dissolution of a civil partnership.
There is no difference in legal status between a pre-nuptial agreement and a post-nuptial agreement. A party to a nuptial agreement is able to ask the Court to make orders that reflect the terms of the agreement and this is now likely to be the outcome provided the agreement is valid and produces a fair result. Nuptial agreements can therefore provide a degree of financial security and certainty, particularly as the Supreme Court has expressly held that there is nothing inherently unfair about such an agreement seeking to ring-fence “non-matrimonial” assets – i.e. assets acquired pre-association, or, acquired during the marriage or civil partnership by gift or inheritance.
Entering into a nuptial agreement: the formalities
A valid nuptial agreement has to meet certain basic requirements. In particular:
- The agreement must be contractually valid, and be able to withstand challenge (for example, on the basis of undue influence, duress or misrepresentation).
- Both parties to the agreement must have received, at the time of the making of the agreement, a disclosure of material information about the other party’s financial situation at the time the agreement is made. In other words, there is a requirement for there to be a full and frank disclosure of the parties’ respective personal and financial circumstances. This is essential.
- Both parties ought to have received independent legal advice at the time the agreement was executed, or, at the very least they should have been advised to do so. Ideally, the parties need to take advice from a lawyer who specialises in family law.
- In the case of a pre-nuptial agreement - the agreement will need to be executed at least 28 days in advance of the wedding or the celebration of the civil partnership.
- The agreement must have been made by deed and contain a statement signed by both parties that they understand that the agreement is a pre-nuptial agreement or post-nuptial agreement and that it will be considered and taken into account by the Court.
- The agreement will need to provide for a fair settlement in the event of the breakdown of the marriage or the civil partnership. The parties will need to ensure that the agreement is regularly reviewed during the course of their marriage or their civil partnership and if there is any material change in their circumstances. The agreement will need to meet the fairness test which is set out in Paragraph 75 of the Supreme Court judgment in Radmacher v Granatino referred to above. It is always sensible to review a nuptial agreement every few years to ensure that it still reflects the parties’ intentions, meets their needs and remains fair.
Propositions of law arising from the Supreme Court decision in Radmacher v Granatino
- It is the Court, and not the parties, that decide the ultimate question of what financial provision is to be made on divorce or dissolution of a civil partnership;
- The overarching criterion remains the search for fairness in accordance with the matters set out in Section 25 of the Matrimonial Causes Act 1973 (and having regard to principles of need, sharing and compensation), but a valid agreement is a material consideration capable of altering what is fair, including in relation to “need”;
- An agreement (assuming it is not impugned for procedural unfairness, such as duress or misrepresentation) should be given weight in that process, although that weight may be anything from slight to decisive in an appropriate case;
- The weight to be given to an agreement may be enhanced or reduced by a variety of factors;
- Effect should be given to a nuptial agreement that is entered into freely with full appreciation of the implications unless in the circumstances prevailing it would not be fair to hold the parties to the agreement (i.e. there is at least a burden on the party seeking to resile from the agreement to demonstrate that the agreement should not prevail);
- Whether it will “not be fair to hold the parties to the agreement” will necessarily depend on the specific facts of the case, but the following guidance is now likely to apply:
- a nuptial agreement cannot be allowed to prejudice the reasonable requirements of any children;
- respect for autonomy, including a decision as to the manner in which their financial affairs should be regulated, may be particularly relevant where the agreement addresses the existing circumstances and not merely the contingencies of an uncertain future;
- there is nothing inherently unfair in an agreement making provision dealing with existing non-marital property, including anticipated future receipts, and there may be good objective justifications for it, such as obligations towards family members;
- the longer the marriage has lasted, the more likely it is that events have rendered what might have seemed fair at the time of the making of the agreement unfair now, particularly if the position is not as envisaged;
- it is unlikely to be fair that one party is left in the predicament of real need while the other has financial security; and,
- where each party is able to meet his or her needs (i.e. is financially independent), fairness may well not require a departure from the agreement.
Conclusion
There is now no doubt that the decision of the Supreme Court in Radmacher represented a significant shift in the approach and weight to be given to negotiated, drafted and freely executed nuptial agreements, absent vitiating factors. Valid nuptial agreements will thus now always be considered and given weight, and often decisive weight, as part of the overall circumstances of a case involving the determination of financial claims on divorce, or, dissolution of a civil partnership. The terms of a valid agreement may therefore affect not only whether an award is made at all, but also the size and structure of any award. The position could change in the future and agreements of this type could eventually become legally binding.