Bargaining in the shadow of love: the enforcement of premarital agreements and how we think about marriage.

• Author: Bix, Brian

INTRODUCTION

Premarital agreements(1) stand at a crossroads of many important topics: contract and family law, public interest and private ordering, feminism, and law and economics. The agreements give unique insights into all of these areas, bringing out issues and problems in a singularly clear way, e.g., how we think about marriage and relational contracts, and how the law should respond to limitations of rationality and to systematic inequalities. As will become clear, this topic is deceptively far-reaching: a proper consideration of the enforcement of premarital agreements touches upon issues as diverse as same-sex marriage, restrictive covenants, surrogacy agreements, and copyright law.

Past discussions of premarital agreements have tended to be either unduly pessimistic or unduly sanguine regarding the enforcement of premarital agreements under traditional contract principles.(2) The pessimists think that enforcement of the agreements inevitably will lead to grave injustice;(3) the optimists think that enforcement of these types of agreements must always increase social welfare, as this is the inevitable result of enforcing all voluntary choices.(4) This Article challenges the views of the pessimists, arguing that the resources of current contract law can protect parties from most of the forms of unfairness that tend to result from premarital agreements, and still provide parties who have a good faith desire to order their own domestic lives with the necessary legal powers to do so. At the same time, this Article argues, relevant to the optimists' claims, that these sorts of agreements raise difficult questions regarding consent and rationality that the courts can and should consider.

Premarital agreements for many years were of interest to the rich and their lawyers,(5) to a handful of academics, and to no one else. In recent years, they apparently have become more common--a trend reflected by, and probably also encouraged by, the attention these agreements command in the popular press.(6)

Much academic discussion of premarital agreements has failed to consider the larger conceptual, doctrinal, and real-world context surrounding them, or has considered only one aspect of the larger context, e.g., gender inequality, while ignoring others.(7) These narrow or partial discussions inevitably fail to see the whole problem, or to consider all of its complexities or all of its possibilities. They thus tend to come too quickly to extreme conclusions, for example, that courts always should enforce the agreements or that courts should place strict controls on them.(8) It would be better to look at all of the facets that these various approaches explore, to illuminate better the whole picture, to get more than one view of the cathedral.(9)

This Article attempts to place the question of the enforcement of premarital agreements in three overlapping contexts. After Part I of the Article offers a brief overview of the legal status of premarital agreements, Part II evaluates the extent to which marriage itself is now or should become a contractual or near-contractual relationship. Part III reviews the approach the law does take, and, to the extent it is different, the approach it should take, to long-term ("relational") agreements. Part IV considers the problem of pervasive inequalities in society, in particular gender inequalities.

1. ENFORCEMENT AND PERCEPTION

   1. Overview of Enforceability

      The legal attitude toward premarital agreements has changed markedly in the past thirty years, though it is far from clear whether this development reflects shifting attitudes toward the family, marriage, family law, contract law, or all of these.(10) As state courts and legislatures continue to choose between differing approaches to the enforcement of premarital agreements, it is worth considering what may be at stake. Among the issues the inquiry most obviously raises are the general move from status to contract in the legal regulation of marriage, our attitudes toward marriage itself, problems of rationality in long-term agreements, and the complex intersection of family law and gender equality.

      Premarital agreements are agreements parties enter into when they are about to marry.(11) In the standard, if somewhat archaic, formulation, the agreements are "in contemplation of marriage." They concern the rights of the parties during the marriage and/or upon the dissolution of the marriage by death or divorce.(12) In this Article, as in most of the relevant secondary literature and most of the reported decisions regarding premarital agreements, focus is placed upon agreements that include provisions relating to the rights of the parties upon divorce.(13)

      The general view of premarital agreements derives in large part from their perceived purpose. One commentator has stated that "[t]he purpose and effect of most premarital agreements is to protect the wealth and earnings of an economically superior spouse from being shared with an economically inferior spouse."(14) Though there does not seem to be substantial empirical study documenting the relative frequency of various kinds and purposes of premarital agreements,(15) even if the one-sided agreements reflect only a small percentage of all premarital agreements, society still must decide how the legal system should treat those relative few. At the same time, the abuses of a few should not color the response to all premarital agreements. Other possible purposes of such agreements include: (1) ensuring that children from a prior marriage retain certain family wealth, despite possible claims by the new spouse; (2) assuring the economically weaker spouse-to-be that he or she will have adequate economic protection after divorce; (3) attempting to make any eventual divorce simpler and less contentious; and (4) assuring that certain family heirlooms or family wealth stay within a family upon divorce.(16)

      Until the mid-1970s, most American courts held that premarital agreements and other contracts made "in contemplation of divorce" were unenforceable as against public policy. Courts reasoned that the agreements were void either (1) because they purported to alter the state-imposed terms of the status of marriage, which were not subject to individual alteration,(17) or (2) because they tended to encourage divorce.(18)

      In fact, the most recent restatement of contract law continues to dec]are: "A promise that tends unreasonably to encourage divorce or separation is unenforceable on grounds of public policy."(19) The vast majority of courts, however, now treats premarital agreements as enforceable, at least in some circumstances.(20) Current applications of the Restatement rule seem to emphasize the "unreasonably" part rather than the "encourage... separation" part, with most courts concluding, if they reach the question at all, that premarital agreements do not encourage separation "unreasonably."(21)

      Agreements in reported cases that one might characterize as "unreasonably encouraging divorce" still appear, but they are few and far between. One such agreement in California contained unusually generous terms; it promised the previously destitute spouse a house and at least half a million dollars upon divorce.(22) Perhaps not surprisingly, the marriage ended after only seven months.(23) The wife sued for divorce, but the California Court of Appeals refused to enforce the agreement.(24) The court stated that the wife had been "encouraged by the very terms of the agreement to seek a dissolution, and with all deliberate speed, lest the husband suffer an untimely demise, nullifying the contract and the wife's right to the money and property."(25)

      The public policy consideration also may explain why some courts historically treated death-focused premarital agreements somewhat differently. These are agreements that affect property division upon the death of one of the spouses. Courts treated these types of agreements with far less hostility than divorce-focused premarital agreements. Courts subjected the death-focused agreements to certain restrictions, but tended to enforce them at times when they refused to enforce divorce-focused agreements.(26) The doctrinal explanation was that death-focused premarital agreements did not give either party an incentive to divorce. One also might speculate that an attempt to keep a family heirloom or other family property within a family--apparently a common purpose of such agreements--is more sympathetic than a divorce-focused agreement, in which, paradigmatically, a richer prospective spouse asks a poorer prospective spouse to give up rights to all but a small part of the wealth and income of the richer prospective spouse.(27)

      In any event, in the 1970s and early 1980s, the public policy argument began to lose its persuasiveness, or at least became insufficiently weighty for making premarital agreements per se invalid.(28) Courts remained hesitant about enforcement, however, and they developed tests for evaluating the procedural fairness of the agreement--inquiring whether the parties disclosed their financial situations, whether any waiver of rights was accomplished with knowledge of the rights waived, and whether the parties consulted attorneys or at least had the opportunity to do so--and the substantive fairness of the agreement at the time of signing and/or at the time of enforcement.(29) Most jurisdictions enforced only those premarital agreements that survived scrutiny of both their procedure and their substance.(30) Most of the jurisdictions applying these fairness requirements held premarital agreements to a higher standard than they held ordinary agreements under comparable protective doctrines of standard contract law such as unconscionability, misrepresentation, and duress.(31) Until the early years of this decade, this was the majority approach to the enforcement of premarital agreements.(32) The details of the standards varied, and...