What is a pre-nuptial agreement?

Pre-nuptial agreements (also known as pre-marital agreements) attempt to regulate in advance what should happen to the assets of the parties in the unhappy circumstances that the marriage should break down. Such agreements have often been said to be unenforceable in England and Wales however, the law in this area is slowly changing, although there remains no definitive answer to the question of whether a pre-marital agreement will be enforced by the Courts. In order to understand why there is such a lack of certainty it is necessary to look at the current law on the breakdown of marriage.

How do the courts deal with the finances on marriage breakdown?

On the breakdown of a marriage the Court has the power to make a variety of orders as to capital, income and pensions. In considering which orders to make, the court will consider all the assets of the marriage, including those in the sole name of either party, whether acquired before or during the marriage.

When deciding which orders are appropriate, the Court is obliged to take into account a number of factors which are set out in the Matrimonial Causes Act 1973 s.25. These are as follows:

A.  The Income Earning Capacity Property and other financial resources which each party has or is likely to have in the foreseeable future, including in the case of earning capacity any increase in that capacity which would be in the opinion of the Court reasonable to expect a person to take steps to acquire.

B. The financial needs, obligations and responsibilities, which each party has or is likely to have in the foreseeable future.

C. The standard of living enjoyed by the family before the breakdown of the marriage.

D. The ages of each party and the duration of the marriage

E. Any physical or mental disability of either party.

F. The contributions which either party has made or is likely to make in the foreseeable future of the welfare of the family including any contribution by looking after the home or caring for the family.

G. The conduct of each party if that conduct is such that it would be in the opinion of the Court inequitable to disregard it.

H. The value to each spouse of any benefit which one spouse because of the divorce will lose the chance of acquiring (most usually pension provision).

In the context of all these factors the Court will make an order which it considers to be fair. This may involve transferring assets out of one party’s name and into the name of the other.

How does a Pre-Nuptial Agreement work?

A pre-marital agreement attempts to regulate in advance what should happen to the parties' assets and, consequently, what type of orders should be made on the breakdown of the marriage.

A pre-marital agreement cannot oust the jurisdiction of the Court to make an order and the court must consider the factors at A to H when deciding which orders to make. If the result brought about by the terms of the pre-marital agreement would be incompatible with English matrimonial law and the factors set out at A to H above the court may make a very different order from that which the terms of the pre-marital agreement envisioned.

Pre-marital agreements will often have been drawn up several years prior to any breakdown in the relationship and circumstances may well have changed by the time divorce proceedings are commenced. An agreement which appeared fair and reasonable at the date it was made, may not necessarily be fair at the date a marriage breaks down.

However, provided the agreement is reasonable, well drafted and complies with certain “safeguards”, it should be persuasive on the court during any subsequent divorce proceedings.

The court will consider the terms of a pre-marital agreement alongside the statutory factors at A to H above and, if appropriate, the court may give effect to the terms of the pre-marital agreement.

The “safeguards”:

i)             Both parties need to take their own independent legal advice from a matrimonial lawyer before signing such an agreement. Ideally that advice should be in writing.

ii)            Both parties must provide full financial disclosure of their current circumstances. This will mean that both parties must disclose to the other valuations for all their assets and liabilities and full details of their income.

iii)           The agreement must make reasonable consideration for any children, both those living at the time of the agreement and those which may be born during the course of the marriage.

iv)           The agreement should be signed by both parties at least 3 weeks before the date of the marriage. This is so as to avoid any suggestion of undue influence or duress on one party to sign the agreement.

Provided these safeguards are complied with, the judiciary do appear to be giving more weight to pre-marital agreements than they have in the past. Nonetheless, there remains a broad spectrum of judicial attitudes towards them.

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