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California Prenuptial Agreements

      

ENFORCEABILITY OF PRENUPTIAL AGREEMENTS

In 1976 the California Supreme Court in the landmark decision of In Re Marriage of Dawley in which California’s Supreme
Court recognized that prenuptial agreements that contemplated divorce were not invalid per se and against public policy
but should be reviewed on a case by case basis to determine if they promoted marital breakdown. In 1986 California took
another important step in recognizing the validity of prenuptial agreements by adopting its version of the Uniform Premarital
Agreement Act which was further amended in 2002. This Act is now adopted in twenty four other states. The current version
of California’s Premarital Agreement Act is contained in Family Code sections1600-1617.

In order to ensure its enforceability any attorney drafting a prenuptial agreement (also referred to an antenuptial or
premarital agreement) should be familiar with the provisions of California’s Premarital Agreement Act and the case law.
For prenuptial agreements executed after January 1, 2002, the Family Code provides that an agreement will not be
enforceable if either (1) the agreement was involuntary or (2) the agreement was unconscionable and there was no
adequate disclosure or (3) the agreement violates public policy.

The following general conclusions can be learned from these requirements which are discussed in more detail below:

•        Both parties should be represented by independent counsel
•        Never wait until just before the wedding to sign a prenuptial agreement
•        Always provide full, fair and reasonable disclosure of all income, assets and liabilities of both sides
•        Ensure that the agreement is fair and does not leave one party without any means of support in the event of divorce

The agreement must be voluntary

Family Code 1615 places on the party seeking to avoid enforcement the burden of demonstrating that the agreement was
involuntary.  (In Re Marriage of Bonds (2000) 24 Cal, 4th 1, at 37. ) All prenuptial agreement executed after January 1, 2002
are deemed to be involuntary and therefore unenforceable unless the court finds that all of the following requirements are
met.:

1.       
 Independent counsel: The party had independent counsel or was advised to seek independent counsel but waived
that right in a separate legal writing. This means that if you can only afford one attorney, the non-represented party must
sign a separate written acknowledgment that they have been advised to retain an attorney but declined to do so. It is not
enough that the acknowledgement is contained in the prenuptial agreement itself. It is often the case that the idea for a
prenuptial agreement is initiated by one spouse: usually the one with the greater assets and income. That person may be
tempted to provide assistance in finding and paying for the other’s attorney. It is good practice to find and pay for one’s own
attorney. If you must rely on a referral from the other party or their attorney then get at least three referrals. Further, if a party
cannot afford to pay an attorney, the other party should loan the money for legal fees rather than paying that attorney directly
in order to avoid the appearance that the attorney is not independent.

2.        
Seven day waiting period: At least seven days must have elapsed between the date that the parties were “first
presented” with the agreement and advised to seek independent counsel and the time the agreement was signed. This
means that if you decide to consult an attorney about drafting a prenuptial agreement days before the wedding, you are too
late. Even if you wait until a few weeks before the wedding, you may run foul of this provision because it is not clear whether
the seven days runs from the first or last draft of the agreement. A conservative interpretation of the statute requires that
once you have negotiated a final draft of the agreement, you must wait a further seven days before signing the agreement.

3.        
Full disclosure to an unrepresented party: If a party waives their right to independent counsel, for the agreement to
still be enforceable the court must find the following: (a) they were fully informed about the terms and basic effect of the
agreement and the rights they were relinquishing by signing the agreement (b) they were proficient in the language of the
prenuptial agreement and in the language in which explanation of the effect of the agreement was given. Further this advice
must be memorialized by the attorney in writing and given to the unrepresented party before they sign the prenuptial
agreement. These requirements make it very difficult for only one party to be represented by an attorney. If you think that you
are saving money by having only one attorney, you are not. That is because that attorney will have to prepare a lengthy
opinion letter to the unrepresented party explaining not only the effect of the prenuptial agreement but also all the rights they
will be relinquishing under California law. Therefore, both sides should always be represented by independent counsel in
preparing a prenuptial agreement.

4.       
 Duress, Fraud and Undue Influence: The court must also find that in signing the agreement or any of the other
writings referred to above, a party did not act under duress, fraud, or undue influence. Fraud is an intentional concealment
of a material fact with intent to deprive the other of a legal right. Duress is where a person has been deprived of their free
will by a threat to the safety of their person, family or property. Undue influence takes place where one takes a “grossly
oppressive and unfair advantage of another’s necessities or distress” or takes unfair advantage of a confidential
relationship. The leading case of
In Re Marriage of Bonds (2000) 24 Cal. 4th is interesting because it suggests that there
is a high burden to prove duress or undue influence. The Court found that there was no confidential relationship between
parties contemplating marriage. They also stated that the overall fairness or unfairness of the agreement was not relevant
to the test of its validity.  They found that the agreement was voluntary in spite of the fact that Bond’s fiancé was
unrepresented, was presented with the agreement a day before the marriage, Swedish was her main language and it was
unclear whether there had been full disclosure. In December 1987, Barry Bonds, the baseball player, told his fiancé, Sun, a
Swedish waitress and make-up artist who was unemployed at the time, that he wanted a prenuptial agreement prior to the
planned wedding that was scheduled to take place the following year. The couple were living in Phoenix Arizona and
planned to fly out to Vegas on February 5, 1988 and get married the day after. On the day of the flight, Barry and Sun met at
his attorney’s office where she was presented for the first time with a prenuptial agreement to sign.  According to evidence
at trial she was advised to consult an independent counsel but declined because she had no assets.  The agreement also
referred to a schedule of the party’s property and assets but there was no such schedule attached. The Supreme Court of
California upheld the trial court’s finding that the agreement was voluntary:

“The trial court determined that there had been no coercion. It declared that Sun had not been subjected to any threats, that
she had not been forced to sign the agreement, and that she never expressed any reluctance to sign the agreement. It
found that the temporal proximity of the wedding to the signing of the agreement was not coercive, because under the
particular circumstances of the case, including the small number of guests and the informality of the wedding
arrangements, little embarrassment would have followed from postponement of the wedding. It found that the presentation
of the agreement did not come as a surprise to Sun, noting that she was aware of Barry's desire to "protect his present
property and future earnings," and that she had been aware for at least a week before the parties signed the formal
premarital agreement that one was planned.”

If the facts had been the same but the prenuptial agreement had been executed after January 1, 2002 there may well have
been a different result since there as no written waiver of the right to obtain independent counsel, no seven day waiting
period and no written explanation in Swedish of the effect of the prenuptial agreement and the rights that Sun was
relinquishing.

A court might find duress or undue influence if there is a history of domestic violence. The case of
In Re Marriage of Balcof
(2006) 141 Cal App. 4th 1509
while dealing with a postnuptial agreement signed after the marriage is illustrative. In that
case the court invalidated a post nuptial agreement on the grounds of duress and undue influence where the husband
signed a post nuptial agreement transferring a percentage of his business to his wife as a result of continued verbal and
physical abuse from the wife, including being hit in the face front of the children and threats by his wife to undermine his
relationship with his children.

In the Dawley case, the Supreme Court held that the fact that wife entered the prenuptial agreement because she was
pregnant and was concerned about her financial security did not amount to under influence but only because “James,
threatened with a paternity suit and likely loss of his position, was in no position to take advantage of her distress”
reflecting this rough equality of bargaining power.” This appears to leave the door open that the threat not to marry a
pregnant woman may be partial evidence of duress or undue inference. In other States the courts are split on the issue
and one commentator has stated that where pregnancy is the only evidence of duress or undue influence, the cases tend
to find agreements valid but where there are other aggravating factors in addition to the pregnancy, the agreement is more
likely to be invalidated.  

The agreement was unconscionable and there was no adequate disclosure

A party may claim that a prenuptial agreement is invalid because it was both unconscionable when the agreement was
executed and that there was no adequate disclosure.

The burden is on the party claiming that the agreement is invalid. Unfortunately, there are no California cases that address
whether or not a prenuptial agreement is unconscionable in this context. Applying the test of contractual unconscionability,
most commentators argue that there must be both procedural and substantive unconscionability. Procedural
unconscionability has been defined as oppression caused by unequal bargaining power and surprise due to hidden and
unexpected provisions. Substantive unconscionability involves a one sided and unreasonable agreement lacking in any
justification. (Little v. Auto Steigler, Inc. (2003) 29 Cal. 4th 1064.) Factors which might have a bearing on the issue of
unconsionability would be whether a party was presented with the agreement as a fait accompli at a lawyers offices just
before the wedding or was given advanced warning and had an opportunity to review a draft before signing, whether any
revisions were made to the agreement at the request of the party challenging enforcement, whether they were represented
by counsel, whether they considered the agreement fair at the time of signing and whether the agreement’s terms were
clearly set out and not hidden in small print. There are many cases upholding prenuptial agreements which seem unfair
but are “well within the permissible scope of advantage to one of the parties.”  

Even if the agreement is unconscionable there must also be a finding that there was no full disclosure for the agreement to
be invalidated. The person claiming that the agreement was invalid must also prove all of the following elements: a) the
party was not provided a fair, reasonable, and full disclosure of the property or financial obligations of the other party, (b) the
party did not voluntarily and expressly waive, in writing, any right to disclosure of the property or financial obligations of the
other party beyond the disclosure provided, and (c) that party did not have, or reasonably could not have had, an adequate
knowledge of the property or financial  obligations of the other party.  It is therefore good practice to provide for full
disclosure of all the parties’ income, assets and liabilities within the body of the agreement and for the parties to
acknowledge that they have exchanged tax returns. The parties should also state in the agreement that they have waived
any disclosure beyond that provided. FN1

Violation of public policy

Provisions in an agreement that seek to impose moral or religious conduct upon the parties during the marriage, limit child
support obligations and divest the Court of the power to make custody decisions in the event of a divorce are against public
policy and may make the entire agreement unenforceable. Therefore it is a good idea to have a provision that the
agreement is severable. Agreements which attempt to impose a penalty upon a party as a result of that party’s “fault”
during the marriage (e.g. infidelity) are generally held to be unenforceable as contrary to the public policy underlying no-fault
divorces in California. In one case a provision in an agreement that contained a liquidated damages clause of $50,000.00
payable by a party who was unfaithful rendered the entire agreement unenforceable.  (Diosdad v. Diosdado (2002) 97
CA4th 470.) This case therefore makes it very unwise to contain any provisions which seek to place restrictions on the
division of property or support on the basis of fault. A more difficult question is whether an agreement that makes
provisions for lump sum payouts is unenforceable on the grounds that it promotes divorce.  In the landmark
Dawley case
the Supreme Court drew a distinction between terms which encourage or promote dissolution (invalid) and terms which
reorders the property rights of the parties to fit their needs (valid).  Therefore, in one case a Jewish couple signed a
“Kethuba” in which the husband promised in the event of divorce to give wife his separate property house and $500,000 or
one half of his assets whichever was greater.  The court believed that the settlement was so substantial that it "threaten[ed]
to induce the destruction of a marriage that might otherwise endure" and invalidated the agreement. (Marriage of Noughrey
(1985)  169 Cal App. 3d 326.)  In another case, the court upheld the agreement where the 76 year old husband millionaire
promised to pay his 46 year old fiancé $100,000 if they divorced on the grounds that this payment was calculated to
compensate her from the loss of spousal support from a former marriage and was therefore a proper "reordering of
property rights to fit the needs and desires of the couple" even though the marriage only lasted a year. (In Re Marriage of
Bellio (2003) 105 Cal App. 4th 630. ) For this reason it is good practice to ensure that any payments following divorce are in
the form of support instead of lump sum property payments.

Special rules for spousal support

A waiver or a restriction of spousal support in the agreement is unenforceable if either the party was not presented by
independent counsel or the agreement was unconscionable at the time of enforcement. There is no provision for a
knowing waiver of the independent counsel requirement. It is impossible to know in advance whether the spousal support
provision is unconscionable because it is tested at some time in the future. We know that a spousal waiver will not be
enforced if it leaves an ill or disabled spousal unable to support themselves. (In Re Marriage of Rosendale (2004) 1119
Cal App. 4th, 1202.  Unfortunately, there is scant California authority for the meaning of unconscionability in the support
context. A leading Oregon case which has been cited by California cases suggest that a waiver of support will be upheld
unless the other spouse has no other reasonable source of adequate support.  (Unander v. Undander (Ore. 1973) 506 P.
2d 719.) That case made it clear that adequate support means the minimum amount a person needs to support
themselves and is not related to the parties’ marital standard of living.  A Colorado Supreme Court upheld a spousal
support waiver between a millionaire husband and wife who was earning only $1500 after the divorce.  (Newman v.
Newman (Col 1982) 653 P.2d 728.) An Arizona Court of Appeals adopted what it called the “majority rule” established in
these cases that spousal support waivers will be enforced unless it would render one spouse without a means of
reasonable support or a public charge either because of a lack of property or unemployment.  (Williams v Williams (Ariz
1990) 801 P.2d 495. )However these cases are not binding on California courts which have not shown any reluctance to
follow a “minority” rule if they feel that to be the enlightened position. It may be prudent to contain restrictions on the
payment of support rather than an outright waiver in any agreement.

FN1        
 In Re Marriage of Dawley (1976) 17 Cal. 3d 342 (premarital agreement in which all property, earnings and income
acquired during marriage remain the acquiring party’s separate property);
Marriage of Bonds (2000) 24Cal. 4th1,
(premarital agreement wherein each party waived any interests in any earnings and acquisitions of the other during
marriage);
Marriage of Cleveland (1976) 76 Cal. App. 3d 357 (agreement signed 15 minutes before marriage providing
that all property then owned by each party acquired daring marriage would remain the acquiring party’s separate property).


Contact a Los Angeles Prenuptial Agreement Attorney at Law Offices of Warren R. Shiell today!
Call for a free consultation now 310.247.9913.


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