Pre-nuptial Agreements
The recent Law Commission report has recommended that pre-nuptial
agreements should be legally binding on divorce. However, this is qualified by
the recommendation that they will only be legally binding after the needs of the
separating couple and any children have been taken into account.
This recommendation by the Law Commission is actually not a significant shift as
pre-nuptial agreements have been recognised by the jurisdiction of England and
Wales since 2010 when the court ruled in favour of Katrin Radmacher - the famous
German heiress whose pre-nuptial agreement stipulated that neither party would
benefit financially if the marriage ended. Following the Radmacher case, the courts
generally follow a pre-nuptial agreement unless they find it to be manifestly unfair
(the unfairness could relate to the circumstances surrounding the signing or the
outcome if the terms are followed).
The Law Commission has also set out the requirements with which pre-nuptial
agreements would need to comply in order to become legally binding, which include:
1. Full disclosure of financial circumstances of both parties at the time of signing;
2. Both parties to take independent legal advice on the agreement;
3. A further restriction, under the Law Commission’s proposals, is that
agreements would only be enforceable “after both partners’ financial needs,
and any financial responsibilities towards children, have been met”.
The report states: “It will remain open to spouses to make agreements about
financial needs, but such terms will not be contractually enforceable and will be
subject to the courts’ scrutiny for fairness as they are at present. A qualifying prenuptial agreement will not remove the parties’ ability to apply for, and the courts’
jurisdiction to make, financial orders to meet their financial needs.”
The issue, as ever, remains as to what actually constitutes “needs”, as there is no
formal legal definition in respect of matrimonial law.
Pre-nuptial agreements remain of greatest relevance to the wealthy or people
entering into second or third marriages where they have assets they wish to try
and keep separate from the marriage.
P3