Chapman Law Review
TO HAVE AND TO HOLD, FOR RICHER OR RICHER: PREMARITAL AGREEMENTS IN THE COMPARATIVE CONTEXT
Copyright (c) 2009 Chapman Law Review; Margaret Ryznar; Anna Stepień-Sporek
The premarital agreement, which permits prospective spouses to plan for divorce, may well be the world’s most unromantic document. Envisioning the end of a marriage not yet begun, prospective couples must divide property not yet acquired. They must select a legal framework governing their marriage and divorce. Lawyers are often invited to participate in the negotiations, fuelling prospective spouses in their demands. Unsurprisingly, therefore, many people prefer to avoid requesting a premarital agreement, despite judicial and social gains in the acceptance of such agreements.
However, odds do not favor lifelong marriages and when divorce ensues, many people resent their divorce settlements. Premarital agreements will therefore always have an important role in many engagements, particularly when one of the partners has noteworthy assets. For example, Hollywood actress Catherine Zeta-Jones reportedly contracted with actor Michael Douglas to receive $2.8 million per year of marriage upon divorce, and if she proved his infidelity, for an additional $5 million. Meanwhile, the premarital agreement between actress Nicole Kidman and singer Keith Urban would purportedly pay Urban about $640,000 for every year that he spent with Kidman, unless he used illegal drugs during the marriage, in which case he would receive nothing. Finally, in light of the public speculation on his marital fidelity, golfer Tiger Woods reportedly amended his premarital agreement, contracting to pay his wife significantly more upon divorce if she refrained from filing for divorce in the immediate future.
These illustrations underscore the inordinate power of premarital agreements in shifting wealth between spouses and discouraging undesirable marital behavior. They also symbolize, to people around the world, the typical use of the premarital agreement: to divide property upon divorce. The simplicity of this popular understanding, however, belies the complexity of premarital agreements. In essence, the premarital agreement permits a circumvention of the statutory defaults governing spouses’ rights and responsibilities not only during divorce or death, but also during marriage. Furthermore, when legislation or case law alters these rights and responsibilities, premarital agreements protect spouses from being governed by the unexpected changes in the law.
However, premarital agreements are not without their problems. Their enforceability in the United States is subject to procedural and substantive review. They also universally raise public policy issues with regard to the meaning of fairness and the limits on freedom of contract. Such issues heighten in the case of mobile couples, which include those who move both inter-state and internationally. Given these issues, it is beneficial to consider the premarital agreement in the comparative context. This is particularly true as state courts and legislatures continue to encounter and address the unresolved issues surrounding premarital agreements.
Although England and the United States have similar understandings of such agreements, the meaning and consequences of premarital agreements in continental Europe markedly differ from the Anglo-American common law tradition, heightening the opportunity for a comparative study. However, while the European approach inherently offers significant insight into the purpose, limits, and effects of premarital agreements, this approach is not as well-known–even to many Europeans–as the American approach, made so famous through Hollywood examples.
This Article therefore endeavors to consider and develop the notion of the premarital agreement in the comparative law context, addressing some of the universal issues surrounding premarital agreements, as well as the particular nuances of certain regulatory frameworks governing this type of agreement. Part I begins by exploring premarital agreements in American law, while Part II reviews the European approach to such agreements, focusing on Poland’s representative approach, but also considering the approaches of France, Germany, and Switzerland. Part III draws lessons from a comparison of these various approaches, concluding that much of the distinction between American and European law on premarital agreements stems from the differing limits placed on the prospective spouses’ freedom of contract. Part III also considers the desirable level of freedom of contract, the ideal characteristics of the regulatory framework of premarital agreements, and, finally, the popularity of such agreements.
I. Premarital Agreements in the United States
In the United States, family law has traditionally remained in the domain of the states. Therefore, American law regarding premarital agreements has developed independently in each state, whether by statute or case law. Even with the introduction of the Uniform Premarital Agreement Act (1983) ( “UPAA”), the law on premarital agreements is far from uniform.
The premarital agreement in the United States has been rapidly developing since 1970, when courts began abandoning their public policy reasons against enforcing such agreements. Posner v. Posner became one of the first cases permitting the enforceability of premarital agreements in the 1970’s, while the UPAA prompted state legislatures to begin drafting statutes on the subject in the 1980’s.
Even today, premarital agreements are subject to certain procedural and substantive limits before a court will uphold their validity. Such agreements also raise important questions of fairness, which state law strives to resolve. Before turning to these questions, however, this Article reviews the brief history and current meaning of premarital agreements in the United States.
A. Definition of Premarital Agreement
At the outset, it is important to define the American premarital agreement, also known as a prenuptial or antenuptial agreement, because its meaning and consequences differ notably from those of the European marital agreement.
The UPAA defines a premarital agreement as “an agreement between prospective spouses made in contemplation of marriage and to be effective upon marriage.” This definition, however, does not reflect the inordinate power of the premarital agreement, which permits prospective spouses to regulate their rights and responsibilities not only during divorce or death, but also during marriage.
In the United States, spouses have significant freedom of contract when it comes to premarital agreements. Spouses may use the agreement to simply assign a piece of property, such as a house, to one of the spouses. Spouses may also completely opt out of the default property distribution regime of their state, which would otherwise govern their property distribution upon divorce.
Specifically, each state has a default property distribution regime of either: 1) equitable distribution, which means a fair but not necessarily equal division between the spouses, or 2) community property, which often results in a roughly equal division of marital property between the spouses. Given their contractual freedom, if prospective spouses reside in an equitable distribution state, they may contract for a community property division. If they reside in a community property state, they are free to write a premarital agreement that would keep their property separate. Prospective spouses may also enter into a premarital agreement that changes the characterization of particular property that would otherwise be characterized as community under the state’s default regime.
The characterization of property is especially important in terms of determining which property one spouse’s creditors may collect against. This is particularly true in community property states. A debtor’s marriage in an equitable distribution state has no impact on creditors, unless the debt is incurred to buy household necessities. In a community property state, however, creditors’ rights expand as a result of the debtor’s marriage: debt may be collected from the spouse’s resources brought into the marriage.
Premarital agreements or, if entered into after wedlock, matrimonial agreements may therefore impact how property is held during the marriage and its effect on third persons, such as creditors. This is particularly important in the nine community property states, and, to give notice to creditors, sometimes these agreements must be recorded in order to be binding on third parties. Nonetheless, as the vast majority of states utilize equitable distribution as a default–thereby blocking a creditors’ access to the property of the debtor’s spouse–the premarital agreement in the United States typically has the most significance upon divorce when the agreement governs its terms.
Premarital agreements may be drafted to either significantly favor or disfavor the more vulnerable spouse upon divorce. For example, a homemaker might include a provision that if his or her spouse is unfaithful, and therefore caused the divorce, that spouse must pay a significant portion of the assets. On the other hand, a significantly lower-income spouse might contract to keep his or her minimal financial marital contributions, leaving the other spouse with the bulk of the assets. Premarital agreements may also be drafted more neutrally toward both parties, so that each maintains some significant assets.
It is important, however, to distinguish the premarital agreement from the separation agreement, which permits already married spouses to contract the terms of their divorce. Cohabiting couples, meanwhile, may not enter into premarital agreements, which become effective only upon marriage.
Another important distinction is that between premarital and postmarital agreements–a distinction that does not clearly exist in the European countries. Postmarital, also known as postnuptial, agreements are similar in substance and procedure to premarital agreements, except that they are signed after marriage. They are used to change provisions in the premarital agreement, or if not already covered by a premarital agreement, to make initial provisions, during the marriage, on the rights and responsibilities of the parties upon divorce or death. Therefore, the main difference between premarital and postmarital agreements is their timing in relation to the marriage.
The premarital agreement is thus an important type of contract with the power to govern a marriage and potential divorce. The terms, meaning, and consequences of such agreements in the United States have further been clarified through judicial and legislative law.
B. A Brief History of the Premarital Agreement
Among the most important milestones in the evolution of the American premarital agreement are Posner v. Posner, the first notable judicial recognition of the enforcement of premarital agreements, and the UPAA, an influential draft of statutory law on the subject.
1. Case Law
Posner v. Posner is often cited as the first case upholding the validity of premarital agreements, making Florida the first state to recognize such agreements. In its opinion, the Posner court noted the artificial distinction in other states’ case law that skirted the issue of the validity of prenuptial agreements, but permitted spouses to contract their own property settlements under narrow circumstances. The court also took “judicial notice of the fact that the ratio of marriages to divorces has reached a disturbing rate in many states.” Therefore, the court concluded that premarital agreements may be upheld under certain conditions.
The Posner court also noted the differing viewpoints of the appellate judges it overruled in the case, whose views summarized the predominant stances on the premarital agreement at the time. These views included that 1) the trial court need not be bound by premarital agreements, though they are permissible, 2) premarital agreements may be void on public policy grounds, and 3) premarital agreements may be as binding on the trial court as an agreement settling one spouse’s property rights upon the death of the other spouse. In overruling the lower court, Posner marked the shift from the judicial practice of voiding premarital agreements to a policy that recognized premarital agreements as binding.
Although most states acknowledged the enforceability of premarital agreements soon after Posner, state courts continued to play a significant role in defining the appropriate parameters of premarital contracts. For example, the Supreme Court of Ohio outlined procedural safeguards in Gross v. Gross, while a Massachusetts court recently found that pregnancy does not negate a bride’s free will to enter into a premarital agreement. In Rhode Island, both parties need not have counsel in order for a premarital agreement to be valid. In New Jersey, the doctrine of equitable estoppel cannot be used to validate an otherwise invalid agreement.
However, states have become clearly divided on certain issues, such as the formalities that must attend such agreements and whether parties could contract on issues such as spousal support. These interstate inconsistencies were most problematic for mobile couples. The UPAA, considered next, aimed to remedy some of these inconsistencies.
2. Statutory Law
The National Conference of Commissioners on Uniform State Laws promulgated the UPAA in 1983 to provide a uniform law on premarital agreements. Approximately half of the states have now adopted some variation of the UPAA.
One of the most important characteristics of the UPAA is its strong support of the freedom of contract. Section 3 of the Act lists several topics a premarital agreement may cover, including property rights, spousal support, and the choice of law governing the agreement. Significantly, this list is not exhaustive and parties may contract on any topic not in violation of either a public policy principle or a criminal statute. The only topic explicitly forbidden from premarital contracting is child support that adversely affects the child, although as a general rule many child-related provisions are typically considered to be against public policy.
Enforcement of premarital agreements is considered in section 6 of the UPAA. This section provides that a premarital agreement is unenforceable against a spouse who did not execute the agreement voluntarily. The premarital agreement is also unenforceable if it was unconscionable when executed and the spouse: (1) was not provided fair disclosure of the other spouse’s financial details; (2) did not waive the right to receive such disclosure; and, (3) did not have adequate knowledge of those financial details. Therefore, a person with knowledge of a spouse’s financial status or reason to know of it, coupled with voluntary execution, cannot contest the premarital agreement. Similarly, a person who waived knowledge of these financial details and voluntarily executed the agreement is bound by it.
Although the UPAA is a source of some guidance, the law on premarital agreements remains in the realm of the states and any generalization is therefore difficult. Nonetheless, it is a fair observation that American states typically provide prospective spouses significant contractual freedom and premarital agreements are enforceable unless they fail judicial review.
C. Theoretical Underpinnings
The modern premarital agreement is rooted in contract law theories. Parties to a premarital agreement, viewed as independent negotiators, have almost full discretion over the contents and scope of their agreement, enabling them to dictate the terms of their divorce absent any enforceability issues. This is particularly important for community property states such as California, where parties may waive their rights to share property.
Many commentators have noted that marriage itself has evolved from a relationship based on status to one regulated by contract. This shift from marriage as regulated by the state to marriage as determined by the private ordering between parties has been called “the privatization of family law.”
However, there are obvious distinctions between contracts and premarital agreements, casting doubt on whether contract law provides an appropriate framework for premarital agreements. Most problematically, the bargaining process in the marital context is not at arm’s length, but “may be afflicted by unreflective love, even infatuation.” Additionally, the characteristics of marriage, so dependent on life circumstances and children, are sufficiently unique to prevent the blind application of pure contract principles.
Nonetheless, premarital agreements are often defended on partnership principles as well. There are inconsistencies, however, in the notion that premarital agreements inherently advance the prospective spouses’ equality. Specifically, a court’s ability to invalidate a premarital agreement suggests that one of the partners is too weak to contract. Conversely, if a court upholds skewed premarital agreements, then spouses may bargain for unequal treatment. It has been suggested that premarital agreements must move in the direction of dividing property equally, or else they are at odds with the view of marriage as a partnership. This proposition, however, would defeat the entire purpose of a premarital agreement, which is to provide parties a method of contracting around defaults. Therefore, it is not entirely clear whether premarital agreements enhance or undermine the idea of marriage as an equal partnership. They may certainly be used by parties to effectively do either, depending on the terms of the agreement.
Although both the partnership and contractual frameworks have flaws when applied to the marital context, they have underpinned and legitimized premarital agreements. As a result, couples have benefited from the opportunity to contractually circumvent judicial and statutory defaults in the case of divorce.
Section six of the UPAA, or the corresponding state statute, governs the enforceability of premarital agreements. However, it is the courts that are the ultimate arbiters of whether a particular premarital agreement governs the terms of divorce. The issue of enforceability arises most frequently following a court’s procedural and substantive review of a premarital agreement.
1. Judicial Review
In order to be upheld by the court, a premarital agreement must survive substantive and procedural review. Occasionally, these separate inquiries are blurred. In other words, if the substance of the agreement appears fair to the court, defects in the bargaining process may be of lesser importance. However, if the agreement seems particularly unfair to one spouse, courts may examine the procedures surrounding its execution more closely.
In terms of substantive review, some courts have departed from the standard unconscionability doctrine by which commercial contracts are evaluated. Instead, judges often examine the fairness of the premarital agreement at the time of divorce. Furthermore, certain topics fall outside the scope of permissible contracting for public policy reasons, including a child’s religion, child custody, child care payments, or parental visitation.
Meanwhile, the test for procedural fairness focuses on the parties’ conduct in obtaining the premarital agreement. First, each party must have voluntarily entered into the agreement, absent fraud, overreaching, sharp dealing, or duress. Additionally, at the time the parties entered into the agreement, disclosure of each party’s financial status is required. Significant departure from these accepted procedural practices provides courts with the opportunity to circumvent premarital agreements in resolving the issues arising during divorce proceedings.
2. Formulaic Premarital Agreements
The question of enforceability plagues not only procedurally and substantively complicated agreements, but also simple ones. Any internet search reveals premarital agreement packages with boilerplate language, allowing the prospective spouses to sign formulaic contracts without spending money on attorneys’ fees.
Ultimately, form premarital agreements are not inherently more or less enforceable than those drafted by lawyers. They are subject to the same procedural and substantive limitations as any other premarital agreement, thus representing a reliable option for low cost divorce planning.
There are certainly advantages and disadvantages to an increased use of such unsophisticated premarital agreements. On the one hand, without lawyers, prospective spouses may not know the depth and scope of potential negotiations, lessening their bargaining power. On the other hand, inexpensive premarital agreements allow spouses of modest means to plan for a potential divorce. Furthermore, because one side does not outmatch the other in legal power, perhaps the spouses achieve greater equality in such negotiations.
In many ways, the formulaic premarital agreement parallels the holographic will. Similar public policy reasons permit both, centering on the autonomy of the individual to dispose of his or her own property. Furthermore, the do-it-yourself premarital agreement symbolizes the preference of the American philosophy for nearly complete freedom of contracting, permitting prospective spouses to enter into an agreement uninfluenced by judicial or legislative preferences. This cornerstone of American philosophy, so favorable to freedom of contract, in fact drives many of the distinctions between American and European law on the subject of premarital agreements.
In sum, Americans may utilize the premarital agreement to avoid judicial and statutory defaults in their states, enjoying significant freedom of contract. The force of the premarital agreement has been effectively developed over the past several decades, resulting in an important role for premarital agreements in many American couples’ engagements. Interestingly, however, premarital agreements have a longer history in many European countries, acquiring significantly different consequences and meaning.
II. European Law on Marital Agreements as Exemplified by Poland
Europe generally does not share the distinction that exists in the United States between premarital and postmarital agreements. Instead, both types of agreements are treated as one type of contract: the marital agreement. The marital agreement may be concluded either before the marriage ceremony or during the marriage.
This Part analyzes the approaches to marital agreements in Europe, focusing on France, Germany, Poland, and Switzerland. The Polish approach is given more in-depth treatment, not only because it is representative of the others, but also because it illustrates notable differences from the American approach.
These European legal systems have several commonalities that are worth mentioning at the outset. Under the French Civil Code, the German Bürgerliches Gesetzbuch (“BGB”), the Swiss Schweizerisches Zivilgesetzbuch (“ZGB”), and the Polish Kodeks Rodzinny i Opiekunczy (“KRO”), there are a few optional systems of matrimonial property law aside from the statutory regime governing the marriage. As a general rule, spouses may modify the standard statutory regime that would apply to their matrimonial relations by means of a marital agreement. Importantly, spouses are not obliged to choose any specific contractual system and can avoid at least some of the consequences of the standard statutory regime. Nonetheless, spouses do not have entirely unrestricted autonomy with regard to their matrimonial property law in any of the countries considered, nor is entering into a marital agreement popular.
A. Various European Countries’ Approaches
It should be mentioned that prospective spouses in many European countries resist marital agreements altogether because they think that such documents are only important upon divorce. Therefore, spouses often do not enter into such agreements because they want to underscore that they are not going to divorce. Such an opinion of marital agreements derives from American movies and news regarding the divorces of celebrities. Very rarely, however, is the situation of these divorcing celebrities analyzed within a larger context and within the legal circumstances that are specific to the United States. This is understandable because the main aim of movies is not to teach.
Nonetheless, the result is that the opinion of marital agreements in Europe is built upon the false conviction that marital agreements in Europe have the same consequences as those in the United States, when in reality the meaning and consequences of such agreements in Europe differ from those in the United States. In Europe, the regime choice made by the spouses in a marital agreement mainly impacts how property is held during the marriage and which property is available to the creditors of one spouse. While the rules of distribution of property upon divorce are also determined by the chosen regime, spouses may modify them only in a very narrow way through the marital agreement.
Therefore, among the most important points to initially consider is that the marital agreement has a different meaning in Europe than in the United States, and differing meanings within Europe as well. In certain European countries, all of the contracts between spouses are called marital agreements. The permissible scope of the marital agreement also differs from European country to country. In some countries, a marital agreement concerns only the relations between spouses, while in others, the agreement may regulate the consequences of a spouse’s death. Furthermore, in some countries, there are only a few models of property regimes from which spouses may choose. In other countries, spouses are not obliged to follow the statutory models of the regimes and have more freedom with regard to the content of their marital agreements.
Nonetheless, two fundamental approaches to marital agreements can be distinguished in Europe. According to the first approach, the marital agreement is a kind of general agreement, constructing the rules of the classification of property and the relations of the spouses, but on the other hand, not regarding any particular property. The second approach is based on the rule that each contract between spouses is a marital agreement, even if it concerns only certain chattels belonging to one spouse.
The meaning of the term “marital agreement” is quite broad in France. It covers not only the agreements in which spouses choose their matrimonial regime, but also the contracts regarding every chattel belonging to at least one spouse. Spouses are free to regulate the rules concerning the management of their property and are entitled, by any kind of agreement, to modify the default statutory community property regime.
There are a few models of property regimes known by the Civil Code in France: separation of property, separation in acquisition, universal community, and community of movables and acquisitions. Spouses may choose among these in their marital agreements, but are prohibited from electing former types of marital regimes, such as, for example, the dotal system.
If the spouses were married without any provision concerning matrimonial property law, the default statutory system of a limited community property is applied. In this system, only property acquired during the marriage is held in common, although gifts and inheritances acquired during the marriage are the separate property of each spouse. Community property belongs to both spouses jointly, although each spouse is able to make ordinary acts of administration of community property. However, important transactions relating to this kind of property need the consent of both spouses.
Importantly, when the record of marriage mentions that a marital agreement has not been made, third parties may assume that spouses have been married under the default statutory regime of limited community property. However, this rule is not applied if the spouses have declared, in the transaction entered into with a third party, that they had made a marital agreement.
The freedom of contract in the field of marital agreements is very well-developed in French law, especially when compared to the other European countries. In their marital agreements, spouses in France may choose one of the property regimes mentioned by the Civil Code, but may also modify the rules of these regimes: spouses may mix different regimes and are even able to establish new regimes that are not recognized by the law. Unlike the other European countries examined here, spouses in France are also able to make provisions for what should happen upon their death. Spouses may also opt for universal community, which is not popular in Europe.
However, there are some limitations on this freedom of contract. For example, the marital agreement cannot be against public order (public morals). Furthermore, spouses are not able to modify the rules of the so-called primary regime (régime primaire) and the statutory order of successions. Finally, spouses are not permitted to derogate from the rules regarding parental authority or guardianship, nor may they derogate from the duties and rights which result from marriage.
In France, marital agreements should be concluded before wedlock. During the marriage, the marital agreement is immutable (principe d’immutabilité). However there is an exception to this rule: spouses may change their financial relations after two years of having a particular regime. In any case, the marital agreement should be agreed upon before a notary and approved by the court. The marital agreement is enforceable after the decision of the court and has effect on third persons three months after mention of it has been entered into the margin of both copies of the record of marriage. Spouses should make a suitable motion to enter information about their marital regime into the record of marriage.
The marital agreement should be concluded by prospective spouses, or by spouses during the marriage, even if one of them has not gained full legal capacity. A minor who obtained consent for contracting into the marriage or an adult in guardianship or curatorship may enter into marital agreements, but must then be assisted by the person who is authorized to give consent for the marriage. The spouses may also give power of attorney to an agent who will conclude the marital agreement acting on his or her behalf.
It is very important that the parties be simultaneously present and that the marital agreement be made with the consent of both spouses or their agents. As previously mentioned, the marital agreement needs to be in the form of a notarized deed. The notary public delivers to the spouses a certificate which confirms that the agreement has been completed. This certificate must be lodged with the officer of civil status before the celebration of the marriage.
Finally, in their marital agreements, spouses may make provisions for a spouse’s death. Specifically, they may decide that the surviving spouse be authorized to receive from the common property “either a specified sum, or a specified property in kind, or a specified quantity of a determined kind of property.” Such a provision does not affect the rights of the surviving spouse under inheritance law. Expenses arising during the marriage may also be allotted to each spouse by a marital agreement.
According to German law, spouses enter into a marital agreement (Ehevertrag) to regulate their financial relationships. This definition of marital agreement is quite broad and therefore the source of some doubts. For example, it is not clear whether contracts made between spouses in order to transfer ownership of a certain part of their property should be treated as marital agreements.
The marital agreement can introduce a marital regime or change the rules of the regime chosen by the spouses. This means that the marital agreement is a special kind of tool used to decide the financial consequences of marriage and the financial relations between spouses. Through it, spouses may choose from the contractual property regimes in Germany, which include separation of property and community of property.
If the spouses have not concluded a marital agreement, they remain in the default statutory regime, which is community of surplus (Zugewinngemeinschaft). This name is misleading, however, because it is actually a regime based on separation of property during the marriage, with the surplus divided at the end of the marriage. If the spouses decide not to contract around this default statutory regime, they are free to make some changes to this regime. For example, spouses may eliminate some of the restrictions regarding the transfer of certain assets or change the rules concerning the equalization of accruals that determine the division of the surplus.
Meanwhile, if the spouses contract into the community property regime, they are able to establish the rules on the composition of each spouse’s separate capital and community property. They may also change the rules of management of the community property, as well as the rules regarding the division of common property.
Generally, there is some freedom of contract in marital agreements in Germany, but spouses must choose one of the regimes stated in the Civil Code. It is also possible to modify some of the statutory rules, but only within certain limits established by law. Spouses are not allowed to introduce any foreign law’s regime that is not recognized by German law. It is also forbidden to mix different regimes. Such limited freedom of contracting in marital agreements is justified by the desire for certainty of business and the guarantee of formality.
In Germany, the marital agreement can be concluded by spouses or prospective spouses. If a spouse does not have full legal capacity, German law is more restrictive than French law. A prospective spouse with limited legal capacity must be assisted by his or her legal representative and, in certain circumstances, must have the approval of the court (Vormundschaftsgericht). Still, both parties to the agreement must be present in front of the notary public. As in French law, the marital agreement should be made before a notary, but the approval of a court is not necessary if the agreement needs to be changed.
The marital agreement should be registered in a special register, kept by a court (Amtsgericht) and called the register of marital regimes (Güterrechtsregister). The registration makes the marital agreement enforceable against third persons from the day of its registration. This duty of registration ensures that third persons know the financial situation of the parties, including the property arrangements made in the marital agreement between the spouses that would impact the scope of property available to the creditors of one of the spouses. The motion to register the marital agreement may be made by either spouse.
Due to this registration, third persons are protected. They may rely on the fact that the spouses are in the regime mentioned in the register. If they are not mentioned because they have changed the regime but their marital agreement has not been published in the register, third parties are not affected. Finally, the register is public and each person who is interested may access it without providing a reason.
Another example of European regulation of marital agreements is found in Swiss law, which treats the marital agreement as a special kind of contract concluded by spouses or prospective spouses in order to choose or modify their marital regime. In such agreements, spouses are free to introduce general rules regarding the classification of their property and to modify the rules of their marital regime. Spouses are also able to choose their marital regime or change it within the limits introduced by law.
The default statutory regime is the deferred community of acquisitions (Errungenschaftsbeteiligung). In this regime, each spouse has his or her separate property during the marriage and upon divorce there is a distribution of goods. Spouses who decide to remain in this standard statutory regime are free to change the rules of the classification of property. Importantly, if they are entrepreneurs, spouses may choose which property will receive income from their commercial activities. They may also change each other’s share in acquisitions.
Spouses may also contract around this default and choose a separate property regime or one of a few types of community property. If community of property is the regime chosen by the spouses, they may decide that their community property will consist only of accruals. They may also establish the rules concerning shares in common property. However, there is a catalog of marital agreements introduced by law and it is forbidden to create regimes containing only certain elements of these different regimes.
The marital agreement (Ehevertrag) may be concluded by spouses during a marriage or by prospective spouses (Brautleute) before wedlock. In order to conclude a valid marital agreement, spouses must possess legal capacity and the contract must be publicly authenticated. Importantly, the marital agreement may be changed at any time during marriage. Contrary to German law, the ZGB does not contain any requirements to publish the marital agreement in a register, however, a marital agreement can be mentioned in a commercial register.
B. The Polish Approach
The main subject of the European Part of this Article is Poland’s approach to marital agreements. Polish law is interesting for two reasons. First, the Polish approach is different from the American one in many respects. Second, Poland’s present regulation of marital agreements is quite new and was influenced by the above mentioned regulations, which have longer traditions and are well-established. Nonetheless, the concept of the marital agreement has a long history in Poland, especially when compared with the American history of premarital agreements. Even in communist times, Polish law guaranteed spouses the possibility of contractually opting out of the standard statutory regime.
Marital agreements in Poland are special treaties for spouses. According to Polish law, the marital agreement (umowa majatkowa malzenska, intercyza) is a contract concluded by spouses or prospective spouses in which their property is regulated in a different way than from the default statutory regime. The marital agreement also organizes the property of the spouses and dictates the ownership of each spouse as a rule in the future. The essence of marital agreements is that they classify property after the agreement comes into force. However, it is also possible to conclude an agreement in which spouses introduce separation of property and divide their common property. In such a case, it is unclear whether this agreement should be treated as a marital agreement because it concerns the previous property as opposed to property which may be purchased in the future.
In Poland, freedom of contract in regards to marital agreements is limited. Such limitations are justified by the aim for certainty of transactions, equity for spouses, and protection of family interests. Spouses are free to introduce regimes named in KRO article 47 § 1, but their freedom is confined to the systems provided by law. When the circumstances causing the mandatory regime have ceased, spouses who were in the mandatory regime may decide to reinstate the previous regime or choose one of the regimes mentioned in KRO article 47 § 1. The spouses cannot introduce any other regime apart from those regimes authorized by law.
If spouses do not choose another regime through their marital agreement, the default statutory regime is limited community of property, similar to that of French law. This means that there are three types of assets in the marriage: the community property, the separate property of the wife, and the separate property of the husband. Both spouses own community property jointly, whether or not the property has been purchased jointly or separately. In this regime, however, spouses cannot change the rules concerning the management of property. This prohibition is in force for both the standard statutory regime of community of property and the contractual extended or limited community of property. Spouses are not allowed to modify the rules of the primary regime and the rules concerning the liability of spouses.
This statutory default of limited community of property is problematic, especially when either one or both of the spouses decide to start a commercial activity. The rules of management and liability for debts may make it difficult to be a married entrepreneur or even a shareholder, increasing the importance of having alternate systems into which spouses may contract by means of a marital agreement.
If the spouses decide to extend community property through their marital agreement, however, they are not able to choose universal community property and at least some chattels must belong to the separate property of each spouse, which is a group of chattels that cannot be part of community property. These are enumerated in KRO article 49. Spouses are not allowed to extend the scope of community property to embrace inalienable rights, compensations for personal injury, or material damage or claims for remuneration for work or personal services outstanding at the time of the marriage. If the spouses decide on a contractual community of property (extended or limited), the rules of administration of community property from the statutory regime are applied. The agreement may have a provision for unequal division of common property upon the end of the regime.
According to KRO article 47 § 1, spouses may extend or limit community property, or choose separation of property or the sharing of accruals. If spouses choose extended or limited property, they may establish that in the case of the liquidation of the community of property, the fractions of each spouse will differ. By choosing the sharing of accruals, spouses may also change the rules of calculation of accruals.
Therefore, the marital agreement regulates the spouses’ property during the duration of the chosen agreement. Spouses are free to conclude different contracts, but only a few of these are considered marital agreements because they must fulfill certain conditions. For example, marital agreements must take a special form in order to be valid: if spouses wish to change their matrimonial regime (either the statutory standard regime or the contractual regime), a notary must be involved.
Contrary to American law, the circumstances regarding the formation of the marital agreements in Poland are not as important and are rarely taken into account. For example, Polish law does not pay significant attention to the fair disclosure of each spouse’s financial details. However, the general rules concerning defects of a will are applied to marital agreements, i.e., the spouse should not be mistaken, under threat, or in a state of mind excluding the conscious making or expressing of the contract.
In Poland, marital agreements may be concluded by both spouses and prospective spouses. If the marital agreement is concluded by prospective spouses, it will not come into force until they are married. If a prospective spouse or a spouse does not have full legal capacity, the consent of the legal representative is necessary, as is the consent of the court. However, the marital agreement may also be concluded by a proxy. The form of the power of attorney is essential. If the marital agreement is to be concluded by prospective spouses, the name of the other prospective spouse should not only be mentioned in the document of the power of attorney, but also given in notarial deed.
The marital agreement–which takes effect either at the moment of conclusion or as established by the spouses–can be changed as often as the spouses desire to change their financial relationships. A similar rule characterizes German and Swiss law.
The marital agreement in Poland has effects in relation to third parties if they are informed of the agreement and of the regime chosen by the spouses. This rule is essential. The regime can affect creditors, who are protected by the above mentioned rule. If the spouses have failed to inform third parties, however, the marital agreement does not have any effect on these third parties. In practice, this kind of situation is very common. Third persons who are not aware of the existence of the marriage contract may assume that the spouses are married under the statutory system.
In Poland, there is no special requirement to register a marital agreement, however, information about marital agreements can be published in commercial registers such as the Krajowy Rejestr Sadowy, the register of companies and stocks, or Ewidencja Dzialalnosci Gospodarczej, the register of individuals who are entrepreneurs.
III. A Comparative Study
While European countries may differ slightly in their approaches to marital agreements, they all differ markedly from the American approach. These various contrasts illustrate the range of prospective spouses’ possibilities in premarital contracting, as well as the options that legislatures have in terms of regulating premarital agreements. A comparison of these varying approaches to premarital agreements also offers important insights regarding the contractual autonomy of the parties, the possible characteristics of premarital agreements, and the popularity of such agreements.
A. Contractual Autonomy of the Parties
While European matrimonial property law is codified in each country’s civil code, the American tradition of freedom of contract provides spouses with the power to contract around state statutory law on the subject. Americans are therefore not restricted to the property regimes laid out in statutes–whether community property or equitable distribution–and may contract around them subject to few limitations by the court. In fact, spouses may even import into their agreements any of the European property systems, such as a system of accruals. Meanwhile, Europeans are often limited to selecting one of the property regimes statutorily permitted in their countries. Although this permits them to avoid the statutory default, they must nonetheless select one of the regimes recognized by law. Only occasionally may spouses alter the rules of those European systems. Americans therefore enjoy more autonomy in premarital contracting relative to Europeans.
These differing levels of contractual autonomy have differing consequences. For example, the general notion espoused by American law is that people should be able to manage their property as they choose, which also justifies the significant freedom provided to people in the contracting of their wills. Furthermore, limited contractual autonomy is criticized as being paternalistic and less efficient. However, one consequence of such significant contractual autonomy is that American courts must occasionally find a premarital agreement substantively unenforceable, particularly when one party’s imaginative contracting significantly disadvantages the other. In the European countries considered, meanwhile, marital agreements will rarely be substantively or procedurally unenforceable because they must adhere to strict statutory requirements in the first place. Furthermore, European spouses cannot introduce their own regime, but instead must select one of the statutory systems recognized by the law. As the Polish approach illustrates, European courts may therefore be slower to find procedural defects in marital agreements. This may also be due to the fact that these marital agreements must be concluded in the presence of the public notary, whose significant role in civil law countries is much greater than in common law countries.
Nonetheless, there may be a relationship between contractual autonomy and the risk of an agreement’s unenforceability. In other words, the less formulaic the premarital agreement, and the less deferential to statutory defaults, the more opportunity for a judicial declaration of unenforceability. In the quest for the right legislative framework to regulate premarital or marital contracting, then, the task becomes to find the right balance between autonomy and the risk of unenforceability.
However, complete autonomy may nonetheless be prioritized because it would permit prospective spouses to choose their own level of risk regarding the enforceability of their agreements. Of course, permitting spouses unrestricted contractual autonomy, thereby allowing them to choose their agreement’s risk of unenforceability, requires somewhat perfect information. Prospective spouses must not only know that straying from formulaic premarital agreements–as well as from typical legislative defaults–increases their agreements’ risk of unenforceability, but they must also be aware of the advantages and disadvantages of choosing particular property regimes and contractual provisions. A lawyer representing each side could help assure this.
Another consequence of unbounded autonomy of premarital contracting, however, is that the courts must continually determine the enforceability of each individual agreement before applying its provisions to a divorce. Scarce judicial resources must therefore be spent, despite the American judiciary’s traditional reluctance to meddle in family matters.
Therefore, keeping prospective spouses informed of their options and expending judicial resources to monitor premarital agreements are the consequences to a high level of autonomy in premarital contracting, as illustrated by the American approach to premarital agreements and a comparison of it to European approaches. Nonetheless, every jurisdiction, whether an American state or an European country, must choose its own balance among these factors and costs.
B. Potential Characteristics of Premarital Agreements
In searching for an appropriate regulatory framework for premarital contracting, as well as the proper content of such agreements, it is instructive to analyze the desirability of the differing approaches to these agreements, including those that deal with aspects beyond the freedom of contract already considered.
For example, some European countries permit, or even require, the registration of marital agreements in order to protect third parties. This registration aims to give creditors notice as to which assets are available for collection. There is a similar requirement in some American community property states for the recording of separation of property agreements. To give adequate notice to creditors, the agreement binds the spouses once executed, but binds third-party creditors only if recorded.
Such registration indeed serves an important, albeit lesser-known, purpose of premarital agreements, which is to organize how the spouses hold their assets during the marriage. If spouses hold their property differently from the statutory default, it may be only fair to give notice of this arrangement to third parties who potentially rely on the spouses’ property holdings when extending credit.
A third party would be most disadvantaged by a couple secretly opting out of a community property default. In such a case, the third party would ordinarily expect all of the marital assets to be held by each spouse, when in reality, each spouse holds smaller assets separately. However as already mentioned, only a minority of American states utilizes community property as the default system, whereas some European countries use this system as their statutory default. Therefore, public registration of marital agreements is significantly more relevant in the European context.
Americans, meanwhile, maintain the confidentiality of premarital agreements. This effectively reduces third parties’ ability to rely on such agreements. Such confidentiality also permits prospective spouses in the United States to contract on intimate details and on their private financial situations. In this way, however, American premarital agreements are often limited to affecting only the married couples who are parties to the agreements.
Finally, in many European countries, prospective spouses must adhere to particular formalities in order to conclude a legally enforceable premarital agreement, such as signing the agreement in front of a notary. There is no such definitive list of requirements in the United States, although a court may subsequently analyze the procedural fairness of the agreement when called upon to enforce the document. Such procedural review may, however, increase the opportunity for the court to find a premarital agreement unenforceable. The level of required formality will therefore inevitably vary from jurisdiction to jurisdiction as each adopts a particular balance between permitting contractual autonomy and protecting the parties from fraud.
Therefore, choices must be made not only among premarital contracting options, but also among the different regulatory frameworks for such agreements. In choosing the appropriate model, each jurisdiction and couple must therefore weigh the costs of their choices.
C. Popularity of Premarital Agreements
Premarital agreements are more popular in the United States than in Europe, but not particularly popular in either. There may be several explanations for this current lack of popularity in premarital contracting on both continents. Many commentators suspect, however, that the agreements’ popularity will increase in the near future.
Importantly, premarital agreements in the United States might be rare because they need not necessarily be drafted for a higher income prospective spouse to avoid an unfavorable statutory default. This is because the higher income earner would prefer an equitable distribution regime, which often results in an unequal distribution, rather than a community property one, which instead results in an equal division of assets. However, most American states use equitable distribution as the default, mooting the need to alter this regime through a premarital agreement. Many European countries, on the other hand, have a statutory default of some type of community property, which might sooner prompt a higher income earner to seek a premarital agreement.
Nonetheless, Americans may use premarital agreements to regulate many of their rights and responsibilities during marriage and divorce, particularly in regards to specific assets they own. Premarital agreements are especially useful to prospective spouses who fit a particular profile. For example, people with children from previous marriages may choose to protect these children’s financial future by virtue of a premarital agreement. People may also utilize such agreements when they are skeptical of the institution of marriage because of their own, or their parents’, failed marriages. Premarital agreements may also be more common among prospective spouses with significant income or age disparities. Further, prospective spouses may choose to keep their property separate by such agreements so that one can use only his or her portion in paying off debts. Finally, when one partner expects to inherit significant money or a family business, she may decide to request a premarital agreement.
Still, premarital agreements are not frequently used in either Europe or the United States, with most commentators estimating that less than 10% of any of these populations use such agreements. In Europe, this may be due to a potential misunderstanding of the role of the premarital agreement, which most Europeans associate with American celebrity divorces, although the meaning and consequences of premarital agreements in Europe differ from those in the United States. In the United States, meanwhile, the limited use of the premarital agreement may be due to Americans’ rather unrealistic sense of optimism regarding their marriages and their fear of signaling divorce. This, as well as the need to protect children from a previous marriage, may also explain why many people are more likely to seek premarital agreements upon second and subsequent marriages. Nonetheless, many prospective spouses around the world are currently choosing not to pursue the benefits offered by premarital contracting, although this may change in the near future.
In sum, the premarital agreement permits prospective spouses around the world to circumvent their jurisdiction’s judicial and statutory defaults in organizing the terms of their marriage and potential divorce. To achieve this force in the United States, the premarital agreement has particularly undergone significant development over the course of the past few decades.
Although the American history of the premarital agreement is relatively short compared to its European counterpart, Americans have quickly achieved unparalleled levels of freedom in marital contracting. This heightened freedom of contract has become one of the most significant differences between the continental European and American approaches to such agreements.
Furthermore, a comparative analysis of these various approaches suggests that the level of autonomy in marital contracts implicates the risk of the agreement’s unenforceability by the courts. A comparative study also offers some insights into improving the regulatory frameworks governing these agreements, as well as the reasons behind people’s reluctance to use such agreements.
In conclusion, although the premarital agreement has attained significant stability and enforceability in countries around the world, issues surrounding such agreements undoubtedly remain. Specifically, premarital agreements in the United States are subject to procedural and substantive review. They also raise universal public policy issues, particularly in the case of mobile couples, concerning the meaning of fairness and the limits on freedom of contract. As state courts and legislatures continue to encounter and address these issues, they may therefore greatly benefit from a comparative study of such agreements.
First, a prenuptial agreement may shield wealth acquired by one spouse before marriage from the other. See, e.g., Osborne v. Osborne, 384 Mass. 591, 594, 428 N.E.2d 810, 813 (1981); DeLorean v. DeLorean, 211 N.J. Super. 432, 435, 511 A.2d 1257, 1259 (Ch. Div. 1986). Second, a prenuptial agreement may stipulate a division of property that is acquired during marriage. See, e.g., Ferry v. Ferry, 586 S.W.2d 782, 783 (Mo. Ct. App. 1979); Gant v. Gant, 329 S.E.2d 106, 109 & n.1 (W. Va. 1985). Third, the contract may predetermine the amount and timing of support one spouse will pay to the other after separation or divorce. See, e.g., Lewis v. Lewis, 69 Haw. 497, 499, 748 P.2d 1362, 1364 (1988); Volid v. Volid, 6 Ill. App. 3d 386, 387-88, 286 N.E.2d 42, 43-44 (1972). Finally, some commentators have advocated the use of prenuptial agreements to structure the terms of the ongoing relationship. See L. Weitzman, the marriage contract 225-54 (1981); Shultz, Contractual Ordering of Marriage: A New Model for State Policy, 70 calif. l. rev. 204, 219-23 (1982).
Recent Developments, Family Law–Prenuptial Agreements–Pennsylvania Supreme Court Rejects Substantive Review of Prenuptial Agreements –Simeone v. Simeone, 581 A.2d 162 (Pa. 1990), 104 Harv. L. Rev. 1399, 1399 n.3 (1991).
[Premarital] agreements are valid and enforceable …(1) if they have been entered into freely without fraud, duress, coercion, or overreaching; (2) if there was full disclosure, or full knowledge and understanding of the nature, value and extent of the prospective spouse’s property; and (3) if the terms do not promote or encourage divorce or profiteering by divorce.
[D]eference to freedom of contract in antenuptial agreement law is undesirable…. [A]cknowledgment of the partnership conception of marriage demands that parties desiring to execute antenuptial agreements approximate the fifty-fifty division of property implicit in the partnership approach or stand prepared to prove the agreements’ substantive fairness at the time of divorce.
Nothing in Section 6 [regarding enforcement] makes the absence of assistance of independent legal counsel a condition for the unenforceability of a premarital agreement. However, lack of that assistance may well be a factor in determining whether the conditions stated in Section 6 may have existed (see, e.g., Del Vecchio v. Del Vecchio, 143 So.2d 17 (Fla. 1962)).
This UPAA provision would most likely be applicable to cases where only one of the parties was assisted by independent legal counsel.
Because of this new freedom for marital partners to divide their property as they see fit, the old rule allowing the court to disregard the property division made by the parties in their [separation] agreement if the division does not conform to the trial court’s view of an equitable property division, no longer is appropriate.
See also Melvin A. Eisenberg, The Theory of Contracts, in The Theory of Contract Law 206, 223 (Peter Benson ed., Cambridge U. Press 2001) (“Autonomy theories of contract are based on the concept that allowing an individual to freely own and dispose of property and freely exercise his will to make choices concerning his person, labor, and property, is a value that is paramount.”).