Ignorance is not Bliss: Why States Should Adopt California's Independent Counsel Requirement for the Enforceability of Prenuptial Agreements

• DOI: http://doi.org/10.1111/fcre.12123
• Published date: 01 October 2014
• Date: 01 October 2014

STUDENT NOTES

IGNORANCE IS NOT BLISS: WHY STATES SHOULD ADOPT

CALIFORNIA’S INDEPENDENT COUNSEL REQUIREMENT FOR THE

ENFORCEABILITY OF PRENUPTIAL AGREEMENTS

Sandra Kennedy*

Prenuptial agreements are gaining popularity among Americans as an effective means of financial protection in the event of

death or divorce. It is widely accepted that prenuptial agreements merit additional procedural and substantive fairness

requirements. However,states have very different requirements for enforcement, and courts often enforce agreements despite

the use of unfair bargaining tactics. Requiring the advice of independent counsel ensures that the parties to a prenuptial

agreement are aware of the terms of the agreement and demonstrates to the court that it was executed voluntarily. While

independent counsel is often one factor that courts consider when examining procedural fairness, it is not a dispositive factor

in the majority of states. In order to promote enforceability, create more predictable outcomes, and achievegreater equality in

the bargaining process, this Note proposes that states adopt California’s statutory provision, or a similar standard, which

requires that the party against whom enforcement is sought obtained independent legal counsel prior to the execution of the

agreement. In order to preserve the freedom of contract, the statute includes a waiver provision, whichallows a party to waive

the right to independent counsel as long as that party is fully informed, typically bythe other par ty’s lawyer, of the basic terms

and effect of the agreement and the rights and obligations he or she is giving up by signing it.

Key Points for the Family Court Community:

• Prenuptial agreements differ from ordinary commercial contracts because the parties do not deal at arm’s length with

each other.

• States have varying procedural and substantive fairness standards for prenuptial agreements, but many do not provide

sufficient protection for vulnerable parties.

• California requires independent counsel, or waiver, to find that a prenuptial agreement has been voluntarily executed.

• By adopting an independent counsel requirement like California’s, states can ensure informed consent and bargaining

equality, while promoting enforceability and predictability.

Keywords: Enforceability;IndependentCounsel;Informed Consent;Prenuptial Agreements;Unequal Bargaining Power;and

Voluntariness.

I. INTRODUCTION

According to a 2010 Harris Interactive poll, approximately three percent of people with a spouse

or fiancé in the United States have a prenuptial agreement.1That number is up from the one percent

recorded in a 2002 poll.2Evidence of the growing trend is further supported by a recent poll of the

American Academy of Matrimonial Lawyer members, in which seventy-three percent of divorce

attorneys cited an increase in prenuptial agreements in the past five years.3

Prenuptial agreements are likely to be used in relationships characterized by one or more of the

following: (1) a significant asset disparity between the parties, (2) a second marriage for one or both

parties, (3) previous family-related court involvement for one or both parties, and (4) the presence of

a family asset or business that one party wishes to quarantine.4While state laws vary, generally,

prenuptial agreements allow parties to dictate property division, spousal support, the choice of law

governing the agreement, and even regulation of behavior during a marriage.5

Correspondence: Skennedy61@gmail.com

FAMILY COURT REVIEW, Vol.52 No. 4, October 2014 709–724

© 2014 Association of Familyand Conciliation Cour ts

The contractual autonomy of prenuptial agreements allows prospective spouses to think realisti-

cally about the relationship, make better decisions, and have more certainty about the future and the

consequences of their marriage.6Prenuptial agreements permit unconventional parties to form rela-

tionships that do not “fit the patterns contemplated in the otherwise applicable law.”7This holds true,

for example, with two older and divorced people who wish to marry, but also to ensure that, in the

event of divorce or death, their property will go to their children rather than the spouse.8Prenuptial

agreements provide prospective spouses with security and control by allowing them to negotiate the

terms of their ever-possible marital dissolution without concern for the consequences dictated by

statutory and judicial defaults.9

Prenuptial agreements are different from commercial contracts in a variety of ways, including the

relationship between the parties, the subject matter, and the time between execution and enforce-

ment.10 The parties to a prenuptial agreement are very likely to be of unequal bargaining power,which

makes such agreements vulnerable to overreaching.11Although individual personalities play a role, the

relative bargaining power of prospective spouses also depends on their relative wealth, ages, and levels

of education.12 The party demanding the agreement is generally the party with the greater bargaining

power.13

Several courts have recognized that prospective spouses are in a confidential, or fiduciary, rela-

tionship.14 Parties in a confidential relationship owe each other the enhanced duty to exercise the

utmost good faith and full disclosure.15 Prenuptial agreements are thought by some to merit a different

approach than commercial contracts because of the emotional relationship between the parties and the

potential for unfairness.16 Courts and legislatures have distinguished prenuptial agreements from

ordinary commercial transactions by imposing standards of procedural and substantive fairness on the

parties.17 Current state laws range between being highly protective of the rights of potentially

vulnerable parties and being highly pro-enforcement.18 For this reason, the same agreement might be

enforceable in one state, but fall short if challenged under a different set of standards in another state.19

When a prenuptial agreement is challenged, courts typically look at a variety of factors: whether

the agreement was signed voluntarily or through fraud, duress, undue influence, or misrepresentation;

whether the agreement was unconscionable at the time of execution; and whether enforcement would

be unfair or unreasonable because of a change in circumstances.20 Most jurisdictions consider the

presence of independent counsel as one factor in deciding the enforceability of a prenuptial contract.21

Public policy favors the enforcement of contracts, and efforts have been made to remedy the

uncertainty and nonuniformity in the treatment of prenuptial agreements.22 Further, many courts

enforce prenuptial agreements despite unfair bargaining tactics used to disadvantage a financially

weaker party.23 Current law reform has been focused on the goals of protecting vulnerable family

members while simultaneously “promoting efficiency, predictability, and reliance in the furtherance of

freedom to contract.”24

This Note focuses on the issue of requiring parties to obtain independent representation before

signing a prenuptial agreement. While the majority of states do not require independent legal advice,

it has been noted that representation indicates to the court that parties knowingly and voluntarily

entered into the agreement and, further, makes it more likely that a challenged agreement will be

upheld.25 By adopting a bright-line test for voluntary execution, states would be able to strengthen

procedural fairness and diminish the uncertainty and unpredictability of enforcement.26

This Note proposes that states adopt California’s independent counsel requirement in their laws

governing the enforceability of prenuptial agreements.27 Such a provision would require that in order

for a prenuptial agreement to be upheld: (1) the party against whom enforcement is sought had

obtained independent legal counsel prior to the execution of the agreement and (2) the agreement was

presented no less than seven days before signing. The provision would also allow for waiver of

representation if a party, after being advised to seek independent legal counsel, expressly waived

representation in a separate writing, but was fully informed of the terms and basic effect of the

agreement and the rights and obligations he/she gave up by signing the agreement.

Part II of this Note provides a brief history of prenuptial agreements in the United States and a

comparative review of the current state of the law regardingindependent advice requirements. Part III

710 FAMILY COURT REVIEW