Pre-nuptial agreements are becoming increasingly common and we are often asked to advise on the contents of pre-nuptial agreements.
In the leading case of Radmacher v Granatino [2010] UKSC 42 the Supreme Court considered whether pre-nuptial agreements are binding and what weight, if any, should be given when exercising their discretion. It was held that the Court may give effect to a pre-nuptial agreement if:-
“It was freely entered into by both parties, with full appreciation of its implications unless in the circumstances it would not be fair to hold the parties to the agreement.”
In layman’s terms, the parties must enter into the agreement of their own free will, without any undue influence. In order for parties to fully appreciate the implications of the pre-nuptial agreement, both parties must obtain independent legal advice and undertake financial disclosure. The Court will deem the agreement to be unfair if for example it leaves one party in a “predicament of real need” or it would prejudice a child of the family. If a pre-nuptial includes a clause which would oust the jurisdiction of the Court, it will be considered as not binding.
The amount of weight the Court will give a pre-nuptial is dependent on whether it is fair to do so and on the facts of each case. The Court will consider a 3 stage fairness test:
1. Needs
The Court will consider the housing and financial needs of both parties as well as their age and earning capacity.
2. Compensation
If one party’s financial situation is much stronger, the Court may need to compensate the weaker party.
3. Sharing
Marriage represents the principle of equality and therefore, each party is presumed to have an equal share unless there is a good reason to the contrary.
Although the Supreme Court stated that pre-nuptial agreements are capable of being legally enforceable, in practice, they will not be enforced as an attempt to do so may be thwarted by an application for financial remedy.
In most cases, the parties’ circumstances have usually changed so dramatically since entering into the agreement, the Court do not deem them as binding as it would be unfair to enforce such agreement. For example, the parties may not have envisaged or included a provision with regards to having children and the pre-nuptial agreement is consequently outdated.
If you would like further advice on pre-nuptial agreements, please contact Lynn Gooch on 020 8502 3991 for more information.