Premarital Agreements

To be upheld, premarital agreements must satisfy local tests of procedural and substantive fairness. As always, procedure and substance are closely related, and legislatures and courts considering the validity of premarital agreements often fail to separate the two. If the substantive terms of an agreement seem fair to the reviewing court, operating with or without statutory guidance, procedural niceties become less important. Conversely, if the agreement seems unfair, the procedures surrounding its execution become more important. The inquiry into procedure is made as of the time the agreement was executed. The question is whether the agreement was fairly procured. The inquiry into substantive fairness may be made at execution or reserved to, or repeated at, the time of enforcement. It is impossible to reduce the search for substantive fairness, whenever it is made, to a single question; the standards vary considerably from jurisdiction to jurisdiction and sometimes from case to case within a single jurisdiction.

Procuring the agreement. According to most courts, parties to premarital agreements are in confidential relationships. In addition they are often ill-matched in terms of bargaining power. Before courts will uphold the validity of premarital agreements, therefore, they must be satisfied that the agreements were fairly procured. As courts and state legislatures describe them, fairly procured agreements are those that the parties enter into voluntarily after making financial disclosure to each other.

The requirement of financial disclosure is closely related to that of voluntariness and follows from the nature of premarital agreements calling for waivers of, or alterations in, property rights prescribed by the state. These rights take on, or lose, value on the bases of spouses' earning power and assets. A waiver of, or alteration in, such rights can hardly be voluntary and therefore fair, if the waiving spouse does not know the other's financial status. Accordingly, most jurisdictions require some kind of financial disclosure before the agreement is signed. They describe its extent variously: fair, full, full and fair, full and frank, or fair and reasonable. An agreement that the court finds substantively fair and reasonable may overcome a lack of disclosure; so may a spouse's actual knowledge of the other's assets or a spouse's waiver of the right to disclosure. The extent of required disclosure or knowledge varies from case to case, depending upon the relative sophistication of the parties, the apparent fairness or unfairness of the substantive terms of the agreement, and other circumstances unique to the parties and their situation. In every case, disclosure should be enough to give each contracting party a clear idea of the other's property and resources. The best device for proving disclosure is to attach schedules of assets and income to the agreement itself. A mere recital of disclosure in the agreement does not preclude a showing that there was none in fact.

Substantive terms of agreement. In passing on the validity of premarital agreements, courts state that they will not substitute their own notions of what is right for the provisions of the parties' freely made bargains. However, neither courts nor state legislatures, whose mandates they are obliged to follow, are oblivious to the substantive fairness of these agreements. This is an amorphous concept, which courts determine on a case-by-case basis. Unequal provisions for the parties do not alone make an agreement substantively unfair and therefore invalid.

The standard of substantive fairness, like the extent of required disclosure, is described variously: for example, reasonableness in the circumstances, not so outrageous as to come within unconscionability principles as developed in commercial contract law, fair and equitable, equitable, fair and reasonable at the time of the making of the agreement, not unconscionable at the time of judgment, and not unconscionable at execution or enforcement. Some states apply different standards to property provisions than those they apply to support provisions. Some distinguish between short marriages and long ones.

The states divide on the appropriate time for measuring substantive fairness—at execution of the agreement, at enforcement, or both. Measuring the substantive fairness of premarital agreements as of the time they were made gives maximum effect to the parties' freedom to contract but does not protect against unforeseen changes in circumstances that may affect the parties' financial status and put one or the other of them at risk if the agreement is enforced. Accordingly, an increasing number of states are assessing the fairness of premarital agreements at the time of enforcement. Provisions waiving or altering support rights are particularly vulnerable under this kind of review. Those that leave a spouse unable to provide for reasonable needs, at a drastically reduced standard of living, or a public charge or close to it, will not be enforced; neither will those that are otherwise unconscionable. This does not lead to a wholesale rewriting of agreements, but it does protect parties against onesidedness, oppression, or unfair surprise.