California's Recent Experience With Premarital Agreements: a Practice Guide for the Future

• Jurisdiction: California,United States
• Author: Christopher M. Moore
• Publication year: 2006
• Citation: Vol. 12 No. 3

CALIFORNIA'S RECENT EXPERIENCE WITH PREMARITAL AGREEMENTS: A PRACTICE GUIDE FOR THE FUTURE

Christopher M. Moore^*

"Marriage . . . is a damnably serious business . . . ."

John P. Marquand, The Late George Apley.

I. INTRODUCTION

Historically, California courts have been ambivalent about premarital agreements. But in more recent years, courts have treated them more favorably, because they fix future property characterization, avoid later disputes, help avoid future litigation and even promote marriage.¹

On the other hand, the courts and the public often view premarital agreements with hostility and distaste. This hostility arises from a number of sources. First, there is often an inequality of bargaining power between the parties. Second, the circumstances surrounding execution of an agreement may indicate duress by one party surprising the other with the agreement at the last minute, after wedding plans have been made, announcements have been sent and guests invited (sometimes literally just before the walk down the aisle). Third, there is an aura of tackiness and bad taste often engendered by the fact that all premarital agreements mix love and money at the very beginning of the marriage. Fourth, the terms of the agreement may appear so one-sided that they are unconscionable (in some instances, one party may be economically worse off after a long marriage than if he or she had never been married at all).

While California courts have generally upheld premarital agreements, with some exceptions based upon public policy, the Legislature has had different ideas, as evidenced by significant statutory changes in 2002. California's experience with premarital agreements shows how the pendulum has swung from a climate of judicial support to legislative hostility in little more than 15 years. California's legislative changes have had one salutary effect: They produced rules which provide sound practice guides that must be followed in every case in California. While premarital agreements will continue to be challenged in many cases, compliance with the statutory rules is the best hope for drafting agreements that will withstand such challenges.

II. RECENT HISTORY OF PREMARITAL AGREEMENTS IN CALIFORNIA

Before 1986, premarital agreements were generally upheld and enforced in California, subject to some important public policy exceptions. For example, the agreement could not waive or limit the court's jurisdiction to award and enforce child support,² waive the statutory duty of spousal support during marriage³ or be "promotive of divorce."⁴ Other prohibited subjects included agreements to pay for the domestic services of a spouse,⁵ to raise children in a particular religion,⁶ penalizing a party for marital fault after 1970,⁷ and waiving in advance California's mandatory financial disclosure rules in divorce actions.⁸ Prior to 2000, it was unclear whether a premarital agreement could waive the right to receive post-dissolution spousal support.⁹ In addition, defenses to the enforceability of contracts in general, such as lack of consideration, duress, fraud and unconscionability, were, and are, available in cases involving premarital agreements.¹⁰

On January 1, 1986, California adopted the Uniform Permarital Agreement Act ("UPAA") with one major exception: it omitted the section stating that the parties could agree to waive post-dissolution spousal support.

In 2000, the California Supreme Court decided two important cases dealing with premarital agreements. The first, In re Marriage of Pendleton & Fireman,¹¹ ended a long period of uncertainty, holding that at least in certain circumstances a party to a premarital agreement may validly waive his or her right to post-divorce spousal support. The Supreme Court stated that a premarital waiver or limitation of post-dissolution support, "executed by intelligent, well-educated persons, each of whom appears to be self-sufficient in property and earning ability, and both of whom have the advice of counsel regarding their rights and obligations as marital partners at the time they execute the waiver . . . does not violate public policy and is not per se unenforceable . . . ."¹² The Court held that the enforceability of the waiver, i.e., whether it was "unconscionable," would be determined at the time of trial, not based on the facts as they were at the date of agreement.¹³ This holding gave little assurance to the drafter that any particular spousal support waiver would later be enforced.

In Re Marriage of Bonds,¹⁴ involved San Francisco Giants outfielder Barry Bonds. The case presented facts which were somewhat unfavorable to the slugger. His fiancée, Sun, spoke Swedish as her first language, was relatively young and had little in the way of education, assets or income. Her knowledge of English was limited. The agreement was presented to her shortly before leaving for Las Vegas to be married to Mr. Bonds and it was prepared by Mr. Bonds's business agent and attorney. Sun was not represented by independent counsel. The trial court upheld the validity of the premarital agreement. The California Court of Appeal reversed the trial court, and the California Supreme Court reversed the Court of Appeal, upholding the enforceability of the agreement, notwithstanding the negatives.

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In reaction to Bonds and Pendleton, the Legislature enacted a number of significant changes to California's version of UPAA. As a result, California's statute no longer resembles the UPAA.¹⁵ The 1986 version of UPAA reflected the then-prevailing attitude that premarital agreements should be enforceable, provided they are freely entered into by the parties without fraud, duress or undue influence and are not violative of public policy. California's amendments to the UPAA, which became effective on January 1, 2002, on the other hand, illustrate the Legislature's and the public's unfavorable view of, and hostility toward, premarital agreements.

The California Legislature enacted six changes, five of them significant, and raised a number of questions.

(1) A provision was added stating that the right to child support may not be adversely affected by a premarital agreement. This merely codified existing law.¹⁶

(2) Waiver of post-divorce spousal support is now ineffective if (a) the party waiving support was not represented by independent counsel or (b) the waiver is found unconscionable at the time of enforcement. Determining unconscionability at the time of enforcement, of course, creates uncertainty in that neither the parties nor the drafters can foresee how the facts may change in future years, possibly causing a provision that both parties considered reasonable when the agreement was signed to become "unconscionable" years later, as the result of poor health, age, or changing financial fortunes.¹⁷

(3) The statute expressly states that an otherwise unenforceable waiver of spousal support cannot be remedied by having independent counsel for the waiving spouse.¹⁸

(4) For a premarital agreement to be executed voluntarily, i.e., to be enforceable, the court must find all of the following:

(a) The party to be charged was represented by counsel or waived counsel in a separate writing.¹⁹

(b) The party to be charged had at least seven calendar days between the time the agreement was first presented, and the time it was signed, and was advised to consult with independent counsel.²⁰

(c) The party to be charged, if unrepresented, was "fully informed of the terms and basic effect of the agreement, as well as the rights he or she was giving up by signing the agreement," and was proficient in the language used to explain the party's rights and the language of the agreement as written.²¹ Moreover, the explanation must be in writing and delivered to the party before signing the agreement.²² The unrepresented party also must execute a declaration stating that he or she received the above information and who provided it, before signing the agreement.²³

This alternative to independent legal representation is so onerous, so difficult to comply with and so fraught with pitfalls that, in the author's opinion, it should seldom, if ever, be relied on. For example, the advice to the unrepresented party must be in writing to be effective. Who is to give that advice? Clearly, that responsibility must fall on counsel for the represented party. What lawyer can guarantee that the unrepresented party was "fully informed" of the "terms and basic effects" of the agreement, and of all the rights he or she may be giving up by signing the agreement? What lawyer is wise and skilled enough to successfully undertake that chore for the opposing party? The issue becomes particularly troublesome when we realize that the agreement, and the circumstances surrounding it, will be but dim memories from another time and place when the divorce comes to trial 15, 20, or 30 years later. Add to these problems the conflicts of interest that arise when counsel undertakes to advise the opposing party, and we are left to conclude that this alternative to independent representation should not be relied on. Both parties should be represented by independent counsel in every case.

(5) The agreement and other required writings must not be executed under duress, fraud, undue influence or lack of capacity.²⁴

This reference to undue influence is new, and raises a question. Undue influence arises out of a confidential relationship. Do fiancées negotiating a premarital agreement owe fiduciary duties to one another? In California, it is presumed there is no such relationship.²⁵ It may be proven in a particular case, however, that a confidential relationship has arisen because of the circumstances, and in that case undue influence will be presumed and found unless rebutted. Where one...