Law Commission consultation paper on the future of pre-nuptial agreements, 17th January 2011

The Law Commission has published its long-awaited consultation paper “Marital Property Agreements” on the future of pre-nuptial agreements. Responses are sought by the 11 April 2011. The Law Commission delayed publication of the consultation pending a decision in the case of Radmacher –v- Granatino [2010] in which the Supreme Court ruled that the court should give effect to a pre-nuptial agreement that is freely entered into by each party, with a full appreciation of its implications, unless it would not be fair to hold the parties to their agreement.

At present, it is down to the courts (in ancillary relief proceedings) to decide on a case by case basis how much weight to give to an agreement made between the parties – the law does not allow couples to prevent each other from asking the courts to decide how their property should be divided.

The consultation paper asks, first, whether couples should be able to enter into a binding agreement not to seek ancillary relief in the event of divorce or dissolution and, secondly, whether such agreements should be able to encompass all of a couple’s property or to contain only terms relating to pre-acquired, gifted or inherited property.

The Commission takes the view that certain formality requirements would need to be met before a marital property agreement could be treated as a qualifying nuptial agreement. For instance, they would be as follows:-

• There must be an agreement
• Each party must intend to be legally bound
• Each party must get something from the agreement (though if the agreement were one-sided, this requirement might be met by entering into a deed)
• The agreement might be invalidated by mistake, duress, undue influence or misrepresentation.

The consultation paper sets out a number of additional safeguards that might be appropriate if qualifying nuptial agreements were to be permitted:

• The agreement must be in writing and signed by the parties
• In order for the agreement to be enforceable against a party, there should be full and frank disclosure of the others party’s financial situation (this is a proposal upon which the Commission seeks responses from the consultees)
• The parties should be legally advised (again responses are sought upon this proposal – as a minimum the Commission provisionally proposes that the advice   should include an explanation of the effect of the agreement on the legal rights of the party being advised and the advantages and disadvantages of the agreement).

The Commission proposes that there should be no timing requirement for execution of the agreement.

The effect of a qualifying nuptial agreement

A qualifying nuptial agreement would be enforceable as a contract and would exclude the court’s discretion to make an order in response to an application for ancillary relief.

The Commission nevertheless takes the view that certain outcomes should be unacceptable. It asks consultees for their views on possible restrictions to the enforceability of qualifying nuptial agreements; for example:

• to the extent that failed to provide for the needs of any children of the family
• where one spouse is left reliant on state benefits.

An agreement which met the formal requirements for a qualifying nuptial agreement, which made proper provision for any children and did not leave either party on state benefits would therefore be enforceable. This would be the case no matter how disastrous the effect upon the parties.

Finally the Commission considers whether there should be certain safeguards, so that, for example a qualifying nuptial agreement would cease to have effect after a certain period of time or on the happening of a specified event (eg the birth of a child of the marriage or civil partnership).

If you would like advice in this area the please contact Miss Vincent or Miss Booth on 01926 422 101