I recently argued a case via Zoom in the appellate division that could have far-reaching implications in this new pandemic world. The issue dealt with an agreement that resolved marital rights in divorce entered into while the parties were happily married. We know that prior to getting married, engaged couples can enter into a prenuptial agreement resolving certain marital issues. The ability for couples to enter into such an agreement has existed since 1988 when it was codified into a Uniform Statutory Law.
Divorcing couples must face and resolve a myriad of issues involving support, property distributions, and, where applicable, the care and custody of children. What ability then do parties have after they are married to contract for and away marital rights and obligations? Before yesterday the law was pretty clear. Mid-Marriage agreements were suspect. Two separate courts have found these types of Mid-Marriage agreements are inherently coercive and as such held that they needed to be seriously scrutinized. Since happily married people are not adverse to each other as they are when they are divorcing and, unlike people contemplating marriage, have already committed to the marriage, it was generally held that the courts needed to examine such mid-marriage agreements to determine if they are fair and fairly entered into. The burden to overcome the presumption of compulsion by circumstance was, these cases opined, monumental. The maxim that to obtain equity one must do equity, rings loudly when questioning such agreements.
In my recent appeal, my adversary argued that the Mid-Marriage agreement should be governed by simple contract law. A deal is a deal he would argue. The protections of those two cases where divorce is threatened should not apply to happily married people. These people, he argued, should be free to contract without restriction. In fact, he argued the dominant financial spouse had no duty of fair dealing or full disclosure. If the subservient spouse did not ask the right questions or seek more information, that person is an adult and should suffer the consequences of the bad deal they chose to make. Spouses should be free Mid-Marriage to give away their rights so long as they have a lawyer, even if that lawyer was hand-selected by the dominant spouse.
At trial, the dominant spouse’s lawyer had argued that even though the agreement was entered into after marriage, that it was none-the-less a binding prenuptial agreement because the dominant spouse had expressed a wish to have such an agreement without specificity before the marriage. The subservient spouse had rejected three overtures for a prenuptial agreement before the marriage. Under questioning on appeal, this lawyer conceded that the agreement was not a prenup and denied he argued that it was in the trial court. His new argument was the freedom to contract argument as a matter of law not equity. Contracts between spouses dealing with marital rights are enforceable in equity to the extent they are fair and equitable. Where there are no equitable counterbalances laws of the contract will generally apply. However, if there are equitable arguments as to enforcement those arguments must be explored. Equitable arguments may deal with the enforcement of the contract or its terms.
It is hard to predict the outcome of an appellate argument. It is easy to predict that the Trial Courts finding that the subject agreement was a prenuptial agreement will be revised because that issue was conceded. The question is, will the Court make new law about mid-marriage agreements?
It is certainly possible that the court will create some sort of ability for married persons to contract, but in doing so the baby is unlikely to be thrown out with the bath. I believe that the Court will certainly establish that such agreements need to be evaluated in light of their inherently coercive nature. In scrutinizing such agreements the motivation of the dominant spouse will certainly be looked into. If the threat of a divorce and the break down of the marriage are not catalysts for obtaining such an agreement could the desire to have one suffice naked and alone. If wanting one is enough, I think it is clear that the Court will create a duty of fair dealing both with regard to the process and the quality and completeness of the disclosure. Independence of Counsel has always been an issue with inequitable contracts and when the dominant spouse selects for his spouse an inexperienced lawyer who is paid by the dominant spouse, the independence and completeness of the advice would need to be investigated. Fairness at the time of execution and at the time of enforcement would also need to be explored. In sum and substance, if the result does not mirror a fair and equitable result after full disclosure and arms-length negotiation, the agreement would fail. If circumstances change such that there are more or less assets than contemplated, the agreement should fail. In other words, the agreement would change nothing if the subservient partner objected but could be binding on the dominant even if it becomes a bad deal. Such an agreement would be dangerous to propose.
I do not claim to have a crystal ball but these are my predictions. I’ll let you know when the decision comes in.