Prenuptial Agreement

Prenuptial Agreement (Prenup) is also known as Premarital Agreement or Antenuptial Agreement. It is a formal written Private Contract signed by two parties who intend to marry each other. It is related to the financial matters between the two parties. Therefore, it comprises a list of all the property that each of them owns and also includes the debt, as well as specifies each person’s right over them after marriage. It commonly includes provisions for Division of Property and Spousal Support in case of a divorce. It results in providing a financial stand to both parties after the divorce.


The objective of a Prenuptial Agreement is financial planning. It protects the interest of parties over the assets owned by them before marriage and keeps one protected from the debts of the other. It can also state if a spouse’s property can be inherited by the children from any previous marriage. It also defines whether the parties will receive alimony or not. Arrangement of what happens to one’s property if a spouse dies before the divorce can also be included. Provisions related to property one may buy after marriage is a valid part of the agreement. There has to be full disclosure of assets and liabilities, a Prenup provides for a fair agreement for both parties. It saves them both from struggling with finances at the time of separation as everything is already mentioned in the Prenup agreement.


As Prenup is a fair agreement, it is made sure that both parties understand the terms fully. Parties are free to be presented with independent legal advice related to the agreement. The agreement has to be signed with free consent, no one should be under undue influence or any other type of physical or mental pressure. Lastly, there should be full financial disclosure on behalf of both parties before they sign the Agreement.

Except for the financial and legal aspects of Prenup, the focus should also be placed on the emotional feasibility offered by this agreement. As the rate of divorce is increasing, due to various reasons, things will get worse when financial matters are added to the emotional trauma faced during the time of divorce. Thus, having a Prenup is a better option than facing all the difficulties at once.

Merits and Demerits of a Prenuptial Agreement

Merits:

  • It respects the property involved and obligations as well as rights of both the parties

  • It protects the premarital assets of both parties as required

  • It protects the financial stability of the children as their suffering is not justified

  • It reduces future conflict at the time of divorce and also the amount of trauma that would be suffered by the parties at that time

  • It helps determine how liability for debt will be shared between the parties

  • It helps avoid extended court proceedings as the financial part of the divorce has been taken before care of

Demerits:

  • It is commonly believed that prenup creates a sense of distrust and leaves the couple more open to the chances of taking divorce,

  • Some state laws cover issues mentioned in the prenup like child care. This leads to a view of it being unnecessary,

  • In few cases, it can use as a way to control the party that is coming into this agreement with fewer assets,

  • It may give rise to feelings of resentment between the parties as one might think that the other is only marrying due to the good financial conditions,

  • It increases pre-marriage expenses as hiring an unbiased lawyer and all the other legal matters can be expensive.


Relation between a Prenup and the Indian Contract Act, 1872

Section 10 of the Indian Contract Act states that “All Agreements are contract if they are made by the free consent of parties competent to contract, for a lawful consideration and with a lawful object, and are not hereby expressly declared to be void.”

We are aware that a Prenup is an agreement (as defined by section 2(e),” every promise and every set of promises, forming the consideration for each other, is an agreement”) and it is signed by the free consent of both the parties.

Also, as the agreement is signed between two parties who are marrying each other we can say that they have attained the age of majority. To understand a contract and to sign it with free consent a person requires rational judgement i.e. being of sound mind and the parties are not disqualified to marry or create a contract related to financial matters under the respective law. Therefore, being competent to contract.

According to Section 23 of the Indian Contract Act, lawful consideration is that which is not against public policy or the court. Marriage in India is considered sacred as it is a religious bond between husband and wife and they do not find social acceptance. Hence, it is considered to be against public policy.

However, the courts in India take cognisance of a prenup if they are made by the free consent of both the parties (as acknowledged in Section 10 of the Indian Contract Act) and are certified by a separate lawyer for each. As it takes a reference to Sections of the Indian Contract Act, we can say it is partially a contract as defined by the Act.


The scenario of Prenup in India

In India, prenups are neither legal nor valid under the marriage laws as marriage is not considered a contract. However, some form of contract is signed as the court considers it if signed by free consent fair to both the parties. These should not violate the laws already in existence, like the Hindu Marriage Act.


Goa is the only state in India where a prenuptial agreement is legally enforceable as it follows the Portuguese Civil Code, 1867.

However, according to an article published in the Economics Times, “the Modi Government is considering the viability of providing legal recognition to prenuptial agreements, as it carries on with the work on gender justice, after introducing a bill to criminalise instant divorce. Maneka Gandhi’s Ministry of Women and Child Development believes making such agreements legally binding would help save marriages. Once the liabilities, assets, and responsibilities are decided in advance, either spouse would be wary of a callous dissolution. The injustice being meted out to women who are deserted by their NRI grooms.”

Hence, we can say that there is a possibility of Prenuptial Agreements becoming valid with legal support in India.


Case Laws related to Prenuptial Agreement

  • Barry Bond V. Sun, 1988

This case involved the marriage of San Francisco Giants All-Star baseball player Barry Bonds. Bonds was earning $106,000 annually when he married his ex-wife (Sun) in 1988. Before getting married, Bonds asked Sun to sign a prenuptial agreement that waived any interest in his earnings and acquisitions during the marriage. Sun signed the agreement despite not having a lawyer present, while Bonds was represented by an attorney. The parties were divorced after six years and two children at a time when Bonds' salary was much higher than when the prenuptial agreement was signed. Sun sued to have the prenuptial agreement ruled invalid. Sun argued that because she did not have a lawyer present at the time she signed the agreement, it was unenforceable, and demanded more money for both spousal and child support.

The case first went to the California Court of Appeal, who determined the prenuptial agreement was invalid. This ruling was appealed up to the California Supreme Court, which found the prenuptial agreement to be valid, deciding in favour of Barry Bonds. The court concluded that the prenuptial agreement was entered into voluntarily, and it was fair to enforce it.

  • Eyster v. Pechnik, 2008

In this case, a one-page prenuptial agreement was drafted by the husband and signed by the parties five days before the marriage. It was the first marriage for both the husband and wife. Neither had significant assets at the time of marriage. Neither party consulted an attorney at the time of signing. At the time of divorce 22 years later, there were significant assets, and following the terms of the prenuptial agreement, the husband would have received well over half the accumulated assets. The lower court upheld the agreement holding that the prenuptial agreement did not strip the wife of “substantially all marital interests''. The Appeals Court reversed on the basis that the agreement did not contain a meaningfully informed waiver of marital rights. There was no evidence to suggest that the wife had been advised to obtain her legal counsel and no evidence that the parties had a substantial understanding of the terms of the agreement, the effect of the terms, or what they were waiving. The prenup itself did not contain a discussion of marital rights or how the rights were altered under the agreement.

  • Krishna Aiyar vs Balammal

This case is a suit by a husband for the restitution of conjugal rights. The District Judge has dismissed it as barred by limitation. Article 35 of the Limitation Act of 1877 bars the suit for restitution if there has been a demand and refusal more than two years prior. This suit was brought after demand and refusal for restitution of conjugal rights. By the compromise (exhibit I) the parties agreed to live together "according to the custom of the world." The agreement further provides "If on any day after this and for any reason whatever you (the wife) should not like to live with me but want to go away from me, I agree to give you Rs 350." It is impossible to contend after this agreement that the previous demand and refusal furnish the starting point for the running of time. The parties have made up their differences and agreed to live together as husband and wife. Unless there is a fresh demand and refusal, time cannot run against the plaintiff's claim for restitution. It is nowhere alleged that after the agreement there has been a demand and refusal. Indeed, the wife did not return to conjugal life. The wife never joined the husband after the agreement and it may therefore be sufficient to say that under the terms of the agreement there is no defence to the action.

  • A.E. Thirumal Naidu vs Rajammal Alias Rajalakshmi, 1967

In this case, the wife instituted a suit for restitution of conjugal rights against her husband, and in answer, the husband put forward an agreement between them to live separately. Under English law, it is well established that a prenuptial agreement to live separately would not be valid. Even a postnuptial agreement would not be valid if it is one to live separately in the future. However, the present agreement to live separately would be valid. The result was that the agreement pleaded by the husband in the case would be no bar to the wife's suit for restitution of conjugal rights.

Premarital Mediation

Mediation is a way of creating a Prenuptial agreement with peace and understanding between the parties so that a balanced, respectful discussion can take place between them. This ensures that the prenup is made per mutual and individual needs. During this process both the parties come up with the terms of the prenup by personal confrontation. They take assistance from a mediator. Through this process, they are also able to form better communication and understanding with each other.

Initially, a mediator is chosen who is recommended to be a divorce mediator. It is made to decide the financial burdens and responsibilities post-divorce and it also gives parties the knowledge of what happens in the case of conjugal dissociation. It gives them a better comprehension to imagine fair and workable provisions in case of a failed marriage.

Both parties discuss their concerns and interests during mediation so that everything is out in the open and the provisions can be made accordingly. The mediator can, based on the concerns and interests of the parties, give a better insight and provide suggestions that will be suitable for each.

A mediator is a neutral person. He/she does not favour any party and understands the view of both with equal attention to both. This levels the playing field as the mediator helps the parties reconcile differences in a fair manner.

An attorney also reviews the provisions decided during the mediation so that his/her professional input can also be taken into consideration. However, they are not allowed to replace their clients’ suggestions with their own.

Hence, mediation helps the parties to draw a fair agreement without creating a feeling of resentment or distrust towards each other. It is therefore a better alternative. After the mediation, the parties will not be able to complain about the terms not being fair or of not being on the same page as they have had a confronted discussion for the formation of Prenup.


Conclusion

From the aforementioned content, we can derive that a Prenuptial Agreement is signed between two parties before marriage to make provisions related to financial matters in case of a conjugal breakdown. The terms of the agreement should be fair and be signed with free consent by both parties. It saves the parties from facing more distress due to financial settlements during divorce when they are already facing emotional trauma. However, it may create feelings of resentment and distrust between the parties.

We can say that the Prenuptial agreement partially comes under the Indian Contract Act due to free consent mentioned under Section 10 but is not valid due to the conditions mentioned in Section 23. In India, a prenuptial agreement is not valid as marriage is considered a sacred bond but can be taken into consideration by the courts. Goa is the only state where it is legal. However, the new government is considering legalising prenup in the whole of India. Prenuptial is a growing concept in Indian society as people are gradually learning about the concept. Various couples are considering it, as the rate of divorce has been steadily increasing.

Lastly, prenuptial mediation is a sensible way to form an agreement as it considers the interests and concerns of both parties. Also, these parties are in a confrontation so they can come up with provisions together avoiding disputes. It helps them have better communication thereby avoiding feelings of resentment or distrust.


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