Are nuptial agreements legally binding?

Justin Creed, legal director in the Family law team at Lodders, offers insight into the legal validity of nuptial agreements.

Nuptial agreements: a definition

Couples planning to marry or enter a civil partnership may choose to make an agreement setting out how their assets and finances should be dealt with if the relationship ends. This is known as a prenuptial agreement, or more commonly, a pre-nup.

Those who are already married or in a civil partnership may choose to formalise arrangements regarding their finances and assets through a similar agreement. This is known as a postnuptial agreement, or a post-nup.

Nuptial agreements are intended to provide clarity and protection in the event of a divorce, particularly where one party has significant personal or family assets, such as inherited wealth or a family business.

As a matter of law, nuptial agreements are not legally binding per se, but they are considered by the court as part of the overall circumstances of the case. When correctly entered into, they are given significant weight by the court, particularly if they are fair and provide for both parties’ needs.

A discretionary approach

In dealing with the division of assets on divorce in England and Wales, the courts adopt a discretionary approach. When exercising this discretion, they must consider several factors, including:

• The individual circumstances of each case
• Income and earning capacities of the parties involved
• Each party’s financial and non-financial needs
• Contributions made by the parties to the marriage
• The standard of living established during the marriage
• The ages of both parties
• How long the marriage has lasted

The first consideration is always given to children of the family who are under the age of 18. Notably, the parties’ conduct towards one another is rarely relevant.

Considering fairness: Radmacher v Granatino

The landmark 2010 Supreme Court case of Radmacher v Granatino clarified how prenuptial agreements should be treated within the court’s discretionary decision-making in divorce proceedings.

The case involved a German-French couple who signed a prenuptial agreement under German law before their marriage, which excluded the husband from benefiting from the wife’s family wealth. When the husband later challenged the agreement, the Supreme Court upheld its validity, emphasising respect for individual autonomy in deciding how their assets are dealt with.

The court ruled that prenuptial agreements, if freely entered into with full understanding and without undue pressure, should generally be upheld and given decisive weight, unless it would be unfair to do so based on the circumstances at the time of divorce.

For an agreement to carry weight, both parties must have had access to all material information when it was made and must have intended it to govern what should happen financially if the marriage ends.

It is unlikely that either party would intend an agreement to leave one of them in a position of real financial need while the other is comfortably provided for. Such outcomes are likely to be considered unfair. Similarly, where one party has contributed by caring for the family and home, while the other has built up wealth, it may not be fair for the agreement to allow one party to retain all that wealth.

Ultimately, the case of Radmacher v Granatino emphasises the importance of people having control over their own lives in negotiating a nuptial agreement. Having said that, it also reinforces that courts will examine the circumstances in which the agreement was made when deciding how much weight to give it. These surrounding factors are often crucial.

Vitiating factors

There are a number of so called “vitiating factors” that can eliminate any weight to an agreement. Such factors include, but are not limited to:

• Undue pressure
• Inadequate knowledge
• Poor legal advice
• Exploitation of a dominant position

An example of this in practice would be if one party presented an agreement to their spouse on the eve of a wedding, coupled with an ultimatum that the wedding be called off if the agreement is not signed. This could be construed as undue pressure.

The presence of any one or more of these vitiating factors may result in the court ignoring the nuptial agreement altogether in determining a final settlement.

SC v TC

The foregoing issues were addressed in the case of SC v TC. Here, the parties had entered into a post nuptial agreement following the wife’s discovery of the husband’s infidelity. The agreement was significantly weighted in the wife’s favour. Another specific and relevant factor in the case was that the husband had Parkinson’s Disease, and his health had progressively deteriorated.

The court considered in detail the circumstances at the time the agreement was entered into. The judge found the husband to have been a vulnerable person over whom the wife took advantage, then gained a substantial advantage in terms of their entering the agreement. The judge held this to be a significant vitiating factor, which rendered the agreement as carrying no weight at all in the decision-making process.

Furthermore, the court also took the view that it would not be fair to hold the parties to the agreement in any event, as it failed to provide adequately for the husband’s needs, particularly in relation to housing and home care. The judge decided that the fairest outcome in the case was for there to be an equal division of the parties’ assets.

Whilst the case of SC v TC offers nothing new in terms of the law, it provides a good illustration of how the courts apply the principles of Radmacher v Granatino to cases involving nuptial agreements.

Meeting the needs of both parties

To return to our initial question, nuptial agreements are not absolutely binding, but parties should be advised that by entering into them, they intend to be legally bound by their terms. Issues surrounding such agreements only come to the fore if they are subsequently challenged by either party in subsequent divorce proceedings.

For an agreement to carry weight, it is first important that there are no vitiating circumstances that would eliminate that weight when the agreement is first drawn up. It is also crucial that the agreement’s terms still meet the needs of both parties at the time it is relied on; that time is not when the agreement was first drawn up, but rather when the court is required to decide an outcome.

Advice on nuptial agreements

Entering into nuptial agreements is a complex area of law. If you are considering this, we’d strongly recommend seeking expert advice from a specialist family lawyer. Lodders’ friendly Family law team offers tailored advice on both prenuptial and postnuptial agreements.

For more information about how we can support you, or to read some of our nuptial agreement FAQs, click here.