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27 February 2014

Law Commission report published today: “Prenuptial agreements should be legally binding”

The Law Commission has today published its report entitled “Matrimonial Property Needs and Agreements”.

The report says that pre-nuptial agreements fulfilling certain conditions will be legally binding if new law is implemented, but it will not be possible to avoid meeting the financial needs of partners and children.

“Pre-nuptials”, and indeed “post-nuptials”, are terminology that we are all getting used to.  In recent years, the Court’s attitude to these agreements has changed and the Courts are giving far more weight to the provisions of such agreements.  However, under current law, the Courts still have discretion as to whether the terms of such agreements are followed.  Nuptial agreements cannot be enforced as contracts and they cannot take away a party’s ability to ask the Court to make financial orders, nor the Court’s powers to make orders.  As a result, the only way to achieve legal finality is to ask the Court to make orders that reflect the terms of the agreement.  The position in relation to pre-nuptials is still not therefore entirely clear, and is at odds with the treatment of pre and post-nuptial agreements in many parts of the world and importantly, is at odds with the wishes of the parties who have entered into them in the first place.

In publishing its report, the Law Commission is trying to take pre-nuptial agreements a step further by recommending that legislation be brought in to introduce “qualifying nuptial agreements”.  These would be enforceable contracts, which would enable couples to make contractual arrangements about the financial consequences of divorce or dissolution of the civil partnership.  In order for an agreement to be a “qualifying nuptial agreement”, certain procedural safeguards would have to be met.

However, the Law Commission has been keen to say that “qualifying nuptial agreements” could not be used to contract out of meeting the “financial needs” of each party and of any children.  As a consequence, a “qualifying nuptial agreement” will not remove the parties’ ability to apply for, and the Court’s jurisdiction to make, financial orders to meet their financial needs.  Subject to that exception and provided that the formal requirements noted above are met, the Law Commission recommends that parties should be able to make agreements that will determine issues about their property.

The Commission, within its report, has included a draft bill to be submitted to the Government for consideration in which these recommendations are made.  Therefore it will still be some time before the Law Commission’s recommendations are put into practice.

Amanda Owens, Associate Solicitor at Steeles Law, comments: “Today’s publication of the Law Commission’s report in this matter is a step forwards in the law in relation to pre-nuptial agreements.  Of course, we are not there yet, as the bill will need to be considered by the Government but if it is introduced, it will help to make the position in relation to such agreements much clearer.  The number of enquiries regarding pre-nuptial agreements has increased over recent years and providing more certainty regarding these agreements will enable the parties to have more autonomy and control, which can only be a good thing.  This means that family property, inheritance and businesses can be dealt with and considered prior to marriage or civil partnership, and could save couples a lot of time and money should they separate at any point in the future.  These are positive and welcome steps forward.  It is also quite likely that we will see an upturn in those wanting to enter into pre-nuptial agreements.  So far they tend to have been used by the more wealthy clients but should be seen as useful to anyone who is anxious to ensure their needs, and those of any children, are met in the future in the event of separation.”

Should you require any advice in relation to pre or post nuptial agreements, or indeed any other matters, then please contact Amanda Owens or another member of the family team at Steeles Law.

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