ENFORCEABILITY OF
PRENUPTIAL AGREEMENTS
By Warren R. Shiell
In 1976 the
California Supreme Court in the landmark decision of In Re Marriage of Dawley recognized that prenuptial agreements that contemplated divorce were not
invalid per se and against public policy but should be reviewed on a case by
case basis to determine if they promoted marital breakdown. In 1986Californiatook another
important step in recognizing the validity of prenuptial agreements by adopting
its version of the Uniform Premarital Agreement Act which was further amended
in 2002. This Act is now adopted in twenty four other states. The current
version ofCalifornia’s
Premarital Agreement Act is contained in Family
Code sections1600-1617.
In order to
ensure its enforceability any attorney drafting a prenuptial agreement (also
referred to an antenuptial or premarital agreement) should be familiar with the
provisions ofCalifornia’s
Premarital Agreement Act and the case law. For prenuptial agreements executed
after January 1, 2002, the Family Code provides that an agreement will not be
enforceable if either (1) the agreement was involuntary or (2) the agreement
was unconscionable and there was no adequate disclosure or (3) the agreement violates
public policy.
The
following general conclusions can be learned from these requirements which are
discussed in more detail below:
- Both
parties should be represented by independent counsel
- Never
wait until just before the wedding to sign a prenuptial agreement
- Always
provide full, fair and reasonable disclosure of all income, assets and
liabilities of both sides
- Ensure
that the agreement is fair and does not leave one party without any means
of support in the event of divorce
The agreement must be voluntary
Family Code 1615 places on the party
seeking to avoid enforcement the burden of demonstrating that the agreement was
involuntary. All
prenuptial agreement executed after January 1, 2002 are deemed to be involuntary
and therefore unenforceable unless the court finds that all of the
following requirements are met.:
1. Independent counsel: The
party had independent counsel or was advised to seek independent counsel but
waived that right in a separate legal writing. This means that if you can only
afford one attorney, the non-represented party must sign a separate written acknowledgment
that they have been advised to retain an attorney but declined to do so. It is
not enough that the acknowledgement is contained in the prenuptial agreement
itself. It is often the case that the idea for a prenuptial agreement is
initiated by one spouse: usually the one with the greater assets and income.
That person may be tempted to provide assistance in finding and paying for the
other’s attorney. It is good practice to find and pay for one’s own attorney. If
you must rely on a referral from the other party or their attorney then get at
least three referrals. Further, if a party cannot afford to pay an attorney,
the other party should loan the money for legal fees rather than paying that
attorney directly in order to avoid the appearance that the attorney is not independent.
2. Seven day waiting period: At
least seven days must have elapsed between the date that the parties were “first
presented” with the agreement and advised to seek independent counsel and the
time the agreement was signed. This means that if you decide to consult an
attorney about drafting a prenuptial agreement days before the wedding, you are
too late. Even if you wait until a few weeks before the wedding, you may run
foul of this provision because it is not clear whether the seven days runs from
the first or last draft of the agreement. A conservative interpretation of the
statute requires that once you have negotiated a final draft of the agreement,
you must wait a further seven days before signing the agreement.
3. Full disclosure to an
unrepresented party: If a party waives their right to independent counsel, for
the agreement to still be enforceable the court must find the following: (a)
they were fully informed about the terms and basic effect of the agreement and
the rights they were relinquishing by signing the agreement (b) they were
proficient in the language of the prenuptial agreement and in the language in
which explanation of the effect of the agreement was given. Further this advice
must be memorialized by the attorney in writing and given to the unrepresented
party before they sign the prenuptial agreement. These requirements make it
very difficult for only one party to be represented by an attorney. If you
think that you are saving money by having only one attorney, you are not. That
is because that attorney will have to prepare a lengthy opinion letter to the unrepresented
party explaining not only the effect of the prenuptial agreement but also all the
rights they will be relinquishing underCalifornialaw. Therefore, both sides should always be represented by independent counsel
in preparing a prenuptial agreement.
4. Duress, Fraud and Undue Influence:
The court must also find that in signing the agreement or any of the other
writings referred to above, a party did not act under duress, fraud, or undue influence.
Fraud is an intentional concealment of a material fact with intent to deprive
the other of a legal right. Duress is where a person has been deprived of their
free will by a threat to the safety of their person, family or property. Undue
influence takes place where one takes a “grossly oppressive and unfair advantage
of another’s necessities or distress” or takes unfair advantage of a confidential
relationship. The leading case of In Re
Marriage of Bonds (2000) 24Cal.4th is interesting because it suggests that there is a high
burden to prove duress or undue influence. The Court found that there was no
confidential relationship between parties contemplating marriage. They also
stated that the overall fairness or unfairness of the agreement was not
relevant to the test of its validity. They
found that the agreement was voluntary in spite of the fact that Bond’s fiancé
was unrepresented, was presented with the agreement a day before the marriage,
Swedish was her main language and it was unclear whether there had been full
disclosure. In December 1987, Barry Bonds, the baseball player, told his fiancé,
Sun, a Swedish waitress and make-up artist who was unemployed at the time, that
he wanted a prenuptial agreement prior to the planned wedding that was
scheduled to take place the following year. The couple were living in PhoenixArizona and planned to fly out to Vegas on February 5, 1988 and get married the day
after. On the day of the flight, Barry and Sun met at his attorney’s office
where she was presented for the first time with a prenuptial agreement to
sign. According to evidence at trial she
was advised to consult an independent counsel but declined because she had no
assets. The agreement also referred to a
schedule of the party’s property and assets but there was no such schedule
attached. The Supreme Court of California upheld the trial court’s finding that
the agreement was voluntary:
“The trial court determined that
there had been no coercion. It declared that Sun had not been subjected to any
threats, that she had not been forced to sign the agreement, and that she never
expressed any reluctance to sign the agreement. It found that the temporal
proximity of the wedding to the signing of the agreement was not coercive,
because under the particular circumstances of the case, including the small
number of guests and the informality of the wedding arrangements, little
embarrassment would have followed from postponement of the wedding. It found
that the presentation of the agreement did not come as a surprise to Sun,
noting that she was aware of Barry's desire to "protect his present property
and future earnings," and that she had been aware for at least a week
before the parties signed the formal premarital agreement that one was
planned.”
If
the facts had been the same but the prenuptial agreement had been executed
after January 1, 2002 there may well have been a different result since there
as no written waiver of the right to obtain independent counsel, no seven day
waiting period and no written explanation in Swedish of the effect of the
prenuptial agreement and the rights that Sun was relinquishing.
A
court might find duress or undue influence if there is a history of domestic
violence. The case of In Re Marriage of
Balcof (2006) 141 Cal App. 4th 1509 while dealing with a
postnuptial agreement signed after the marriage is illustrative. In that case
the court invalidated a post nuptial agreement on the grounds of duress and
undue influence where the husband signed a post nuptial agreement transferring
a percentage of his business to his wife as a result of continued verbal and
physical abuse from the wife, including being hit in the face front of the
children and threats by his wife to undermine his relationship with his
children.
In the Dawley
case, the Supreme Court held that the fact that wife entered the prenuptial
agreement because she was pregnant and was concerned about her financial
security did not amount to under influence but only because “James, threatened
with a paternity suit and likely loss of his position, was in no position to
take advantage of her distress” reflecting this rough equality of bargaining
power.” This appears to leave the door open that the threat not to marry a
pregnant woman may be partial evidence of duress or undue inference. In other
States the courts are split on the issue and one commentator has stated that
where pregnancy is the only evidence of duress or undue influence, the cases
tend to find agreements valid but where there are other aggravating factors in
addition to the pregnancy, the agreement is more likely to be invalidated.
The agreement was unconscionable and there was no
adequate disclosure
A party may
claim that a prenuptial agreement is invalid because it was both unconscionable
when the agreement was executed and that there was no adequate
disclosure.
The burden
is on the party claiming that the agreement is invalid. Unfortunately, there
are no California cases that address whether or not a prenuptial agreement is unconscionable in
this context. Applying the test of contractual unconscionability, most
commentators argue that there must be both procedural and substantive
unconscionability. Procedural unconscionability has been defined as oppression caused
by unequal bargaining power and surprise due to hidden and unexpected provisions.
Substantive unconscionability involves a one sided and unreasonable agreement
lacking in any justification. Factors
which might have a bearing on the issue of unconsionability would be whether a party
was presented with the agreement as a fait accompli at a lawyers offices just
before the wedding or was given advanced warning and had an opportunity to
review a draft before signing, whether any revisions were made to the agreement
at the request of the party challenging enforcement, whether they were
represented by counsel, whether they considered the agreement fair at the time
of signing and whether the agreement’s terms were clearly set out and not
hidden in small print. There are many cases upholding prenuptial agreements which
seem unfair but are “well within the permissible scope of advantage to one of
the parties.”
Even if the
agreement is unconscionable there must also be a finding that there was no full
disclosure for the agreement to be invalidated. The person claiming that the
agreement was invalid must also prove all of the following elements: a) the party was not provided a fair, reasonable, and
full disclosure of the property or financial obligations of the other
party, (b) the party did not voluntarily and expressly waive, in writing, any
right to disclosure of the property or financial obligations
of the other party beyond the disclosure provided, and (c) that party did not
have, or reasonably could not have had, an adequate knowledge of the property
or financial obligations of the other party. It is therefore good practice to provide for
full disclosure of all the parties’ income, assets and liabilities within the
body of the agreement and for the parties to acknowledge that they have
exchanged tax returns. The parties should also state in the agreement that they
have waived any disclosure beyond that provided.
Violation of public policy
Provisions in an agreement that seek to impose moral or
religious conduct upon the parties during the marriage, limit child support
obligations and divest the Court of the power to make custody decisions in the
event of a divorce are against public policy and may make the entire agreement
unenforceable. Therefore it is a good idea to have a provision that the
agreement is severable. Agreements which attempt to impose a penalty upon a
party as a result of that party’s “fault” during the marriage (e.g. infidelity)
are generally held to be unenforceable as contrary to the public policy
underlying no-fault divorces in California .
In one case a provision in an agreement that contained a liquidated damages
clause of $50,000.00 payable by a party who was unfaithful rendered the entire
agreement unenforceable. This case
therefore makes it very unwise to contain any provisions which seek to place
restrictions on the division of property or support on the basis of fault. A
more difficult question is whether an agreement that makes provisions for lump
sum payouts is unenforceable on the grounds that it promotes divorce. In the landmark Dawley case the Supreme Court drew a distinction between terms which encourage or promote dissolution (invalid) and
terms which reorders the property rights of the parties to fit their needs (valid). Therefore, in one case a Jewish couple signed a “Kethuba” in
which the husband promised in the event of divorce to give wife his separate
property house and $500,000 or one half of his assets whichever was greater. The court believed that the settlement was so substantial that it "threaten[ed] to induce the
destruction of a marriage that might otherwise endure" and invalidated the agreement. In another case, the
court upheld the agreement where the 76 year old husband millionaire promised
to pay his 46 year old fiancé $100,000 if they divorced on the grounds that
this payment was calculated to compensate her from the loss of spousal support
from a former marriage and was therefore a proper "reordering of property rights to fit the needs and
desires of the couple" even though the marriage only lasted a year. For this reason it is good practice to ensure
that any payments following divorce are in the form of support instead of lump
sum property payments.
Special rules for spousal
support
A waiver or a restriction of spousal support in the
agreement is unenforceable if either the party was not presented by independent
counsel or the agreement was unconscionable at the time of enforcement. There
is no provision for a knowing waiver of the independent counsel requirement. It
is impossible to know in advance whether the spousal support provision is
unconscionable because it is tested at some time in the future. We know that a
spousal waiver will not be enforced if it leaves an ill or disabled spousal
unable to support themselves.
Unfortunately, there is scant California authority for the meaning of unconscionability in the support context. A
leading Oregon case which has been cited by California cases suggest
that a waiver of support will be upheld unless the other spouse has no other
reasonable source of adequate support.
That case made it clear that adequate support means the minimum amount a person
needs to support themselves and is not related to the parties’ marital standard
of living. A Colorado Supreme Court
upheld a spousal support waiver between a millionaire husband and wife who was
earning only $1500 after the divorce.
An Arizona Court of Appeals adopted what it called the “majority rule”
established in these cases that spousal support waivers will be enforced unless
it would render one spouse without a means of reasonable support or a public
charge either because of a lack of property or unemployment.
However these cases are not binding on California courts which have not shown any reluctance to follow a “minority” rule if they
feel that to be the enlightened position. It may be prudent to contain
restrictions on the payment of support rather than an outright waiver in any
agreement.
© 2009 Warren R. Shiell. All rights reserved. Los Angeles Divorce and Family Law
Attorney. The information
contained in this website is an "Advertisement." It is for
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An Attorney-Client relationship shall only be created when this office agrees
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article states the state of the law as of 2009 and there may be subsequent
changes in the law which render all or part of this article obsolete.
California Prenuptial
Agreements, California Prenups, California Premarital Agreements
