2 Criteria for an Enforceable Premarital Agreement

• Library: Premarital Agreements: Drafting and Negotiation (ABA) (2017 Ed.)

2 Criteria for an Enforceable Premarital Agreement

§2.01 Scope of This chapter

This chapter addresses the general validity of premarital agreements and the basic criteria for a valid agreement. The issue of validity of the agreement as a whole must be distinguished from the question of enforceability of a particular provision. For example, in a few states a provision fixing or waiving spousal support is always unenforceable, and in all states, such a provision could become unenforceable as a result of circumstance.¹ An unenforceable spousal support provision will generally be severable from an otherwise valid agreement.²

§2.02 Essential contractual Elements

A premarital agreement is a contract, albeit of a special type. Thus, to be enforceable, it must adhere to basic requirements for formation of any other contract. The contract must be entered into voluntarily by persons with legal capacity to contract, and there must be consideration.³

(a) Consideration

Both the Uniform Premarital Agreement Act (UPAA) and the Uniform Premarital and Marital Agreements Act (UPMAA) provide that a premarital agreement is valid without consideration.⁴ However, the UPAA merely codifies the common law principle that marriage alone is adequate consideration for a premarital agreement.⁵ Thus, nothing more is required.

(b) Formalities

Almost uniformly, state law requires that a premarital agreement be in writing and signed by both parties.⁶ Before modern enactments, such as the Uniform Premarital Agreement Act, an agreement on consideration of marriage was among those which Statutes of Frauds rendered unenforceable unless there was a written agreement or other writing memorializing the terms. These statutes still exist in many states. The UPAA requires that a premarital agreement be in writing and signed by the parties, as does the UPMAA.⁷

The UPMAA updates the requirement for a writing. A "record" is defined as "information that is inscribed on a tangible medium or that is stored in an electronic medium and is retrievable in perceivable form."⁸ The conventional concept of "signed" is also expanded to include the use of an "electronic symbol, sound or process"⁹ to "authenticate or adopt a record . . . ."¹⁰ Thus, under the UPMAA parties could enter into an agreement that exists in an electronic format without signing an actual paper document in ink. Nevertheless, many lawyers will continue to prefer creating a paper document and having parties execute multiple originals with inked signatures and initials on every page, including the financial disclosures.

Some states require additional execution formalities such as acknowledgment,¹¹ recordation in the land records where real estate affected by the contract is located,¹² or witnesses.¹³ These requirements are strictly enforced.¹⁴

(c) Legal Capacity

At common law, legal capacity to contract is an essential element of all contracts.¹⁵ Thus, a premarital contract executed by one who lacked capacity at execution will generally be voidable.¹⁶

§2.03 Approaches to Determining Validity: Process versus substance

Two schools of thought provide the framework for determining the validity of a premarital agreement. One school of thought considers a premarital agreement to be a contract no different than any other contract and therefore governed by strict contract principles.¹⁷ Parties are assumed to be equally capable of protecting themselves and are thus held to their bargain if the process leading to the execution of the agreement was fair. Adherence to an analysis of procedural fairness only will generally permit enforcement of an agreement that was substantively unfair or unconscionable at execution and remains so at death or divorce. The procedural fairness standard incorporates consideration of substantive terms only to a limited extent. This is the approach taken by the UPAA and many non-UPAA states.

In the other school of thought, courts have a greater role to play in insuring a fair result.¹⁸ A substantive fairness analysis is concerned with the adequacy of the terms of the agreement and whether it makes fair and reasonable provision for the economically weaker spouse. Substantive fairness may be judged as of execution, as of enforcement, or both. A substantive fairness review necessarily allows a degree of judicial subjectivity in deciding whether to uphold an agreement.¹⁹ Moreover, a standard of review that allows a judge to determine fairness as of the date of enforcement permits consideration of events occurring after marriage even though it is precisely to avoid the risk of the uncertainties ahead that motivates many parties to want a premarital agreement in the first place.

The dominant trend is to permit parties to accept any terms they can agree upon so long as the process by which they got there was fair. Even in states where there is a role for the court to judge substantive fairness at enforcement, courts rarely invalidate on that ground alone.²⁰

§2.04 Fiduciary or Confidential Relationship

Historically, the status of prospective spouse created a fiduciary or a confidential relationship that imposed an obligation of fair dealing and utmost honesty. Because of this relationship of mutual trust and confidence, courts believed that parties to an impending marriage could not deal at arm's length.²¹ Currently, some states retain the principle that prospective spouses are in either a confidential or a fiduciary relationship, although modified to impose the obligation on both parties without regard to gender,²² rejecting the "archaic presumption of dominance by the husband. . . ."²³ Other courts have rejected application of principles of fiduciary or confidential relationships in favor of treating premarital agreements like any other contract.²⁴ As the California Supreme Court observed in Bonds v. Bonds,²⁵ the UPAA does not contemplate "that the voluntariness of a premarital agreement would be examined in light of . . . strict fiduciary duties. . . ."²⁶ There is no presumption of undue influence arising from the agreement to marry under the UPAA.²⁷

Even when there is no presumption of a fiduciary or a confidential relationship between prospective spouses as a matter of law, such a relationship may exist in a given case as a matter of fact:

A fiduciary relationship is "something approximating business agency, professional relationship, or family tie impelling or inducing the trusting party to relax the care and vigilance . . . ordinarily exercised." Asleson v. West Branch Land Co., 311 N.W.2d 533, 539 (N.D. 1981). . . . A fiduciary relationship develops when someone is under a duty to act for, or to give advice to, another person upon matters within the scope of the relationship. . . . A fiduciary relationship generally arises from an unequal relationship between the parties. . . . For a fiduciary relationship, the superior party must have a duty to act in the dependent party's best interest. . . . [W]hether a fiduciary relationship exists is generally a question of fact.²⁸

The existence of a fiduciary or a confidential relationship as a matter of law, or as a result of the parties' particular circumstances, operates to impose a mutual obligation for full financial disclosure. Further, it requires closer scrutiny of the procedural fairness and substantive terms of the agreement than would be required for an ordinary commercial contract; it also shifts the burden of proof of the elements of validity—most importantly, that the agreement was not secured through undue influence—from the opponent to the proponent of the agreement.²⁹

§2.05 Burden of proof of Enforceable premarital agreement

(a) Proof of Existence and Terms of Agreement

The party relying on a premarital agreement has the burden of proving the existence and terms of the agreement.³⁰ The client should be advised to keep a signed original or a photocopy of a signed original of the agreement in a safe place. It is also a good idea for counsel to retain a signed original or a copy of the signed original. When the agreement refers to an asset disclosure schedule as an attachment, counsel should advise the client to retain the schedule and keep it attached to the agreement at all times.³¹

(b) Burden of Proof of Validity

States take various approaches to placement of the burden of proof required to uphold, or establish the invalidity of, a premarital agreement. The goal of the attorney for the proponent should be an agreement that a court will uphold under any burden of proof that may be applicable, preferably on a motion for summary judgment.

• Burden on the Opponent at All Times. Both the UPAA and the UPMAA place the burden of proving invalidity on the opponent of the agreement. That burden never shifts.³² Some non-UPAA states similarly place the burden of proof on the party opposing enforcement.³³
• Burden of Proof on the Proponent at All Times. A few states put the burden of proof on the party relying on the premarital agreement to prove the existence of a valid contract.³⁴
• Burden on the Opponent, Shifts to the Proponent Once the Opponent Makes a Prima Facie Case. In a few non-UPAA states, the opponent of the premarital agreement generally has the burden of proving invalidity. However, the burden shifts to the proponent when the opponent makes a prima facie case.³⁵ Even where the burden is generally placed on the opponent, when the specific facts of the case show the existence of a fiduciary relationship at the time of execution, the burden of proof will shift to the dominant party to disprove fraud or overreaching.³⁶
• Burden on the Proponent, Shifts to the Opponent Once the Proponent Makes a Prima Facie Case. In Pennsylvania, the proponent bears the burden of proof of disclosure, after which the burden shifts to the opponent.³⁷ Similarly, in Maryland and Oklahoma the proponent bears the burden of proving the agreement was executed voluntarily with full disclosure.³⁸ If the proponent can show there was an actual

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