Pre-nuptial agreements should be binding says Law Commission

The Law Commission has released a long-awaited report which suggests that pre-nuptial agreements should be legally binding in the event of a divorce.
The report follows three years of consultation, during which the Law Commission received 150 responses from members of the public, lawyers and other professionals and organisations.

The full report includes a draft bill, which if enacted by Parliament, would allow couples to make legally binding agreements for the first time about the division of assets in the event of the relationship breaking down.

Pre-nuptial agreements are not currently binding in England and Wales, however, the judgment of the Supreme Court in the case of Radmacher v Granatino in 2010 said that the agreement should be given “decisive weight” unless it is deemed unfair.

The Law Commission’s report seeks to clarify some of the confusion surrounding the legality of pre-nuptial agreements by setting out plans to introduce ‘qualifying pre-nuptial agreements’ which would be binding on the couple in the event of divorce.

Qualifying criteria

To create a qualifying pre-nuptial agreement the couple must adhere to certain criteria:

• The parties must sign the agreement no less than 28 days before the wedding.
• The agreement must be contractually valid, such as no fraud, undue influence or misrepresentation.
• Both parties must have independent legal advice.
• Both parties must make full and frank disclosure of their assets.
• The pre-nuptial agreement must provide for the needs of both the parties and any children.
• A statement from the couple to show that they understand the agreement is a ‘qualifying nuptial agreement’, which will partially remove the court’s discretion to make financial orders.

If the pre-nuptial agreement adheres to all of the criteria above then it will be binding and the court will have no discretion to make an order differing from its terms. It is intended that these terms would also be applicable to post-nuptial agreements.

If any of the above criteria were absent from an agreement then it would not necessarily be void, but it would mean that the court would have discretion as to whether to apply it to any settlement.

Safeguards

The report warns that introducing pre-nuptial agreements without protection of the parties’ needs “would be very damaging” as pre-nuptial agreements “must provide for the needs of the parties and any children”. This suggests that tortuous legal disputes over maintenance payments and financial needs would still have to be brought before the courts.

The Law Commission stresses this in their report:

 “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 nuptial agreement will not remove the parties’ ability to apply for, and the courts’ jurisdiction to make, financial orders to meet their financial needs.”

Sheata Karim, Solicitor and Founder of Grayfords, has an in-depth knowledge of pre-nuptial agreements and is pleased with the contents of the report:

“The Law Commission’s report is a long-awaited step forward in what is currently an uncertain area of law. More people than ever with the intention to marry want to make provisions for their future in the form of pre-nuptial agreements.

“They should be able to do so without any ambiguity but instead with clarity, certainty and security. I hope that parliament grasps this opportunity to make the much needed, necessary changes to the law.”