I. INTRODUCTION
In general people are free to marry when and whom they want and to organize their marriages as they wish. But should they be free to tailor the law of ancillary relief on divorce to their individual plans and ideas? Until recently, in England, the answer to the question has been ‘no’.Footnote 1 However, over recent years, the clear ‘no’ has first developed into a ‘not really…’ followed by a ‘… maybe it would be good if they could’. Now, after the Court of Appeal's decision in Radmacher v Granatino , the answer seems to be developing more and more into a ‘yes, as long as they are reasonable…'. Interest in marital property agreements has increased and the courts have shown more and more sympathy with such agreements.Footnote 2 After the hearing of Radmacher v Granatino in March 2010, an important new decision of the Supreme Court is to be expected. The Law Commission of England and Wales has recommended partnership agreements for cohabitantsFootnote 3 and started a project on ‘marital property agreements’ in late 2009.Footnote 4
Taking the decision of Radmacher v Granatino and German law of marital property agreements as a starting point, this article highlights some issues in relation to agreements in family law and discusses arguments in favour of the introduction of marital property agreements in England and Wales for married couples.Footnote 5Radmacher v Granatino showed a strong interest in giving weight to marital property agreements, making constant use of the term ‘contract’ despite the fact that there is a considerable reluctance in England to use contracts in very personal affairs. The article discusses from a comparative perspective how the long-established English understanding of marriage as creating a status and of the contract as a tool for commercial transactions has thus far impeded the introduction of enforceable marital property agreements. To understand what such agreements are, and why they could be desirable, a look at English law alone will not suffice. A comparative look is taken across the channel to continental Europe. Since Radmacher v Granatino focused on German law, the paper will concentrate on that legal system as well, while making reference to other pertinent continental legal examples.
Next, the article inquires why such agreements might be useful, and discusses whether pre-nuptial agreements violate public policy, a problem stressed in MacLeod v MacLeod. The article then explores the concept of private autonomy which was so often referred to in Radmacher v Granatino and which is still regarded as the basis of German marital property agreements. Autonomy of the person, the ideal of traditional 19th century contract law, the ability to live life according to one's personal choices, can justify not only commercial contracts but also marital property agreements. The freedom to arrange marriage as the parties wish should be reflected in their freedom to make arrangements for the financial breakdown of their partnership. It is argued that a rethink of family law could be helpful, which could start by comparing marriage with partnership law, where the freedom to conclude partnership agreements is widely accepted.
However, while still acknowledging its importance in European private law, the article accepts that autonomy has lost some of its sparkle in the development of 20th and 21st century contract law. Freedom of contract is not freedom without boundaries. Consequently, the article explores the possible risks inherent in marital property agreements, analysing problems in relation to the conclusion, content and application of marital property agreements in changed circumstances. In doing so, the article refers to German case law, and thereby seeks to avoid what Rix LJ has called an ‘insufficiently international outlook’.Footnote 6 The article makes suggestions regarding how judges could deal with such agreements now, before the legislator steps in, especially with respect to the problem of how to enforce pre-nuptial agreements when circumstances have changed after their conclusion. Moreover, the problems discussed can highlight issues the Law Commission and the legislator should address when considering the introduction of enforceable marital property agreements.
Though the notion of such agreements will be explored in detail later, one word in relation to terminology: the term ‘pre-nuptial agreement’ is used to indicate an agreement concluded before the wedding. If an agreement concluded after the wedding is meant, the term ‘post-nuptial agreement’ will be used. However, throughout this article the more general term ‘marital property agreement’ is used to refer to any agreement, whether concluded before or after the wedding, in which spouses regulate and modify rights to property and maintenance after the breakdown of a marriage. Agreements regulating the couple's behaviour during the marriage are not discussed in this paper.Footnote 7
II. RADMACHER V GRANATINO
The facts of this case are ideal to exemplify the problems and opportunities arising out of prenuptial agreements. Miss Radmacher is the offspring of a German family of considerable wealth. She met Mr Granatino in London where he worked for JP Morgan, earning about £300,000 per year. He was of French origin. When they decided to get married, Miss Radmacher asked for a prenuptial agreement. Her father insisted on her concluding such an agreement, as is sometimes done in Germany and France. The pre-nuptial agreement was drafted by a German notary. Both parties waived all their rights to maintenance and marital property in the event of divorce. The couple got married in London in 1998. They had two children and lived very comfortably, especially since the wife's father transferred shares of considerable value to her. Her fortune is assessed at £100 million. In 2003, the husband left JP Morgan and went back to Oxford University to do a DPhil and to pursue an academic career. But even before he left for Oxford, the relationship had become strained. In 2006, the parties separated and divorced.
At first instance, Baron J decided the pre-nuptial agreement could not carry decisive weight in her decision on ancillary relief and awarded the husband a substantial sum. The appeal of the wife was successful, however, and Thorpe, Rix and Wilson LLJ awarded the husband only enough to enable him to be an adequate home-maker for his young daughters. They held that since such agreements were common in both France and Germany and to give adequate importance to the parties' private autonomy, the ‘contract’ should carry decisive weight when awarding ancillary relief, despite the fact that the Privy Council in MacLeod v MacLeod Footnote 8 had held that pre-nuptial agreements contradicted public policy.
III. AN INTERNATIONAL OUTLOOK
A. What Are Marital Property Agreements?
Most people have an idea what a martial property agreement is. Often, such ideas are inaccurate, however, and inspired by films like ‘Intolerable Cruelty’, where rich husbands try to defend their wealth against gold-digging wives by means of agreements so complicated that professors at Harvard Law School need a semester to explain them. Though the following explanation will hopefully not be that time-consuming, it is of some importance in order to clarify how marital property agreements are understood in continental Europe, where they are frequently used. The different approach of English and continental European law with regard to marital property agreements, especially in Germany, was stressed in Radmacher v Granatino and therefore is of some importance for the English discussion. Realizing the importance for the decision both from a European and a domestic perspective, Thorpe LJ said: ‘As a society, we should be seeking to reduce and not to maintain rules of law that divide us from the majority of the member states of Europe.’Footnote 9
B. A Marriage Contract
For a German lawyer, the classification of a pre-marital agreement as a contract is self-evident. Such an agreement is called ‘Ehevertrag’, which means ‘marriage contract’. This understanding is helped by the fact that in Germany, the notion of contract is more general than in English law, embracing all different kinds of legally relevant agreements including gifts and the conveyance of title.Footnote 10 The broad understanding of the contract does not stop at commercial transactions but often includes marriage itself. Since the enlightenment, marriage has often been described by legal scholars as a contract governed by special rules and formalities.Footnote 11 It was argued by many natural lawyers on the continent, that married parties should be free to negotiate the terms of the marriage contract.Footnote 12 Though in the 19th century in Germany, the draftsmen of the German civil code generally accepted the notion of marriage as a status and moral union which the legislator could not freely regulate,Footnote 13 the code never excluded the idea of marital property agreements.
C. Marital Property Regimes and Marital Property Agreements in Germany
In civil law countries, including Germany and France, spouses are free to make provision for the financial effects of their partnership's breakdown by means of a marital property agreement.Footnote 14 The functions of such agreements go beyond divorce, however.
Since the Married Women's Property Act 1882, in England, marriage has not had any direct effect on the spouses' rights over their property.Footnote 15 Only in the event of divorce, the Marital Causes Act 1973 gives the judge discretion to redistribute the spouses' property to provide ancillary relief. The situation is different on the Continent, however. Continental legal systems embrace matrimonial property regimes. In some countries—for example France, Spain, Italy, Belgium, and the NetherlandsFootnote 16—there is community of property.Footnote 17 The spouses become co-ownersFootnote 18 of all the property either of them acquires during the marriage. At the time of divorce, each spouse takes his or her share. In other countries, like Germany and in the Nordic countries, each spouse keeps sole title to his or her property throughout the marriage. Only on divorceFootnote 19 or in the event of death, is property divided between them. In Germany, however, in order to secure the common household and the material existence of the family, spouses are not free to dispose of household objects and the whole of his or her assets without the consent of the other.Footnote 20
In most countries, the marital property regime the spouses live in can be modified by means of a marital property agreement. Such agreements not only influence a future divorce but have an immediate impact on the parties' rights to their property during the marriage. As long as a couple lives in a community of property regime, spousal consent is required for the transfer of most assets. The couple can also agree, however, to keep their property separate during the marriage and on divorce. Under the German separation of property regime (‘Gütertrennung’ § 1414 BGB), each spouse can dispose of his or her own property without restriction, and marriage has no financial consequences but maintenance obligations.Footnote 21 This can be important for an entrepreneur who wants to use the assets freely as security.
Marital property agreements also have an impact on the law of succession. In most community of property regimes, for example, a surviving spouse receives at least a share of the estate as compensation for the dissolution of the community of property by death, while spouses who have agreed on separation of property may just inherit assets like other relatives. Thus, marital property agreements are not only recommended as a safeguard for a future divorce but can also serve as an important means of estate planning.Footnote 22 In times when divorce was less common than today, marital property agreements served that purpose even more often.Footnote 23
Apart from a share in the marital property, in Germany, divorced spouses can ask for maintenance according to statutory rules, which give less discretion to the judges than English law does.Footnote 24 Moreover, a divorced spouse has a right to half of the pension rights the partner obtained during the marriage, ‘Versorgungsausgleich’.Footnote 25
In the German civil code (Bürgerliches Gesetzbuch, BGB), the term marital property agreement (Ehevertrag) technically only refers to an agreement by which a couple's marital property regime is modified (§ 1410 BGB). These days, however, the term is in practice used in a wider sense, including agreements on maintenance and pension sharing. While agreements on marital property have always been part of the German civil code, agreements on maintenance were a different matter. Only in 1938, § 80 EheG was introduced which said that agreements on maintenance did not contradict public policy just because they could facilitate divorces.
Agreements modifying a spouse's rights to maintenance and pension sharing can in practice be even more important than agreements on the matrimonial property as most people do not own many assets to be shared on divorce. Maintenance and pension rights, however, can be of crucial importance to secure a divorced spouses income during illness and old age.
D. Time of Conclusion and Formalities
In Germany, a martial property agreement can be concluded before the wedding or during the marriage. Quite often such agreements are concluded when the marriage is already in a crisis and the parties want to make provision for a future divorce. In such agreements the couple often makes provision for the children.Footnote 26 Such agreements might be more familiar to English lawyers since divorcing couples make frequent use of such agreements in order to save time and money in court.
In most continental European countries, marital property agreements must be concluded in the presence of a notary. who explains the law to the couple and ensures that both understand the agreement's effects. In Radmacher v Granatino the work of the notary, Dr Magis, is explained. It is interesting that Baron J reasoned that the husband did not receive independent legal advice. If that was true, German couples would almost never obtain proper legal advice before concluding marital property agreements. A notary is not a solicitor, though he or she must have completed the same legal education. A notary, however, is under a public duty to act as the impartial mediator and advisor of both parties. Concluding a marital agreement is not meant to be a dispute where both parties hire lawyers to fight one another. Rather, such agreements are meant to achieve a carefully drafted compromise between the interests of both parties.Footnote 27
E. Why Are Marital Property Agreements Concluded?
Though marital property agreements are not particularly romantic, there are a number of reasons why such agreements are concluded. Unlike in England, on the continent it is clear how big a slice of the pie divorced spouses can ask for. Exceptions to this rule are AustriaFootnote 28 and the Nordic countries where the judge has more discretion to determine claims to matrimonial property.Footnote 29 Generally, however, continental matrimonial property regimes and maintenance rules are meant to produce clear, predictable outcomes.Footnote 30 The downside is that such rules can be inflexible with respect to the specific organization and development of the couple's marriage. In a marital property agreement, however, the parties can tailor ancillary relief each might receive on divorce according to the marriage they plan.
Notaries estimate that, in Germany today, approximately 10 per cent of married couples have concluded a matrimonial agreement. These include couples from all social classes, ages and nationalities. Despite a widespread perception, such agreements are not used by only the super-rich. Many cases decided by the Federal Supreme Court (Bundesgerichtshof), Germany's highest judicial authority on civil and criminal law cases, concern couples who earn less than the average income.Footnote 31 Couples who have been previously married, for example, who have children from previous relationships or have already made provision for their old age often want to exclude post-matrimonial rights.Footnote 32 In such circumstances, not dissimilar to those of the couple in Crossley v Crossley,Footnote 33 and MacLeod v MacLeod Footnote 34 it seems reasonable to conclude a marital property agreement.Footnote 35
Notaries claim that an increasing number of young people, who do not plan to have a family but prioritize a career for both partners, insist on having matrimonial agreements to remain financially independent. They are not prepared to give half of their income and property to a divorced spouse who chooses to work in a more enjoyable but less lucrative job, as Mr Garantino did when he moved form JP Morgan to Oxford University. Very often, entrepreneurs conclude marital property agreements to avoid a sale of their businesses to pay off their spouse on divorce.Footnote 36 In some memoranda of association and partnership agreements of law firms, concluding a marital property agreement is a precondition to becoming a partner.Footnote 37 In some cases, the father of an unborn child is only prepared to marry his pregnant girlfriend after a marital property agreement has been concluded.Footnote 38 Other frequently cited cases include a marriage between a rich and a less well-off partner,Footnote 39 as in Radmacher v Granatino. Miss Radmacher wanted to be sure that her fiancé wanted to marry her for love and not because of her money. Her father insisted on the agreement as well to ensure that property he intended to transfer to his daughter would not be given to his son–in-law in the event of a divorce.
Marital property agreements are also common among spouses of different nationality, like Miss Radmacher and Mr Granatino. It is not only qualified young people with an international education, like them, who conclude such agreements. The German case law on marital property agreements also include cases of marriages between Germans and partners from Russia,Footnote 40 BrazilFootnote 41 and PolandFootnote 42 who did not have sufficient language skills to earn a living in Germany.
Muslim couples may wish to agree on a traditional Islamic dowry (maher) in marital property agreements to show their compliance with tradition. In Germany and the US,Footnote 43 cases on the enforcement and notion of such agreements have already been ruled upon by the courts. The English judgment A v T (Ancillary Relief: Cultural Factors)Footnote 44 also addressed this issue.
In England, there are even more factors which could make the conclusion of such agreements attractive. Since 1973, English matrimonial law has been much more flexible than that on the continent, the judge having discretion to make orders suitable for the parties and their circumstances on the breakdown of their marriage. However, especially in ‘big money cases’, where the cases following White v White and Miller v Miller and McFarlane v McFarlane have caused concern, marital property agreements could make divorces more predictable and thus save time and money in courts.Footnote 45 This might be a reason for the popularity of such agreements in the US states that follow the equitable distribution system, which is comparable to the English system of ancillary relief.Footnote 46 Rix LJ alluded to these factors in Radmacher v Granatino, saying: ‘A carefully fashioned contract should be available as an alternative to the stress, anxieties and expense of a submission to the width of the judicial discretion.’Footnote 47
IV. RETHINKING ENGLISH FAMILY LAW
A. At Odds with English Legal Tradition
Given the undeniable advantages of such agreements, it might seem surprising that English law has denied their enforcement for such a long time. The Radmacher decision again is an ideal vehicle to explain this point.
When Miss Radmacher appealed against the decision of Baron J her counsel, Richard Todd QC, argued the freedom to conclude a contract was ‘at the heart of all modern commercial and legal systems’. Though not citing this sentence in the decision, the word ‘contract’ was used an astonishing 171 times in Radmacher v Granatino. The term must therefore be considered of some importance. But the classification of pre-nuptial agreements as contracts is far less obvious than in Germany.
In England, with its rule that a contract is a bargain between its parties and requires consideration, a quid pro quo, the notion of a ‘marriage contract’ is unfamiliar. Professor Collins has even argued that the law of contract is properly understood as the law regulating commercial transactions.Footnote 48 A marital property agreement, however, is not a commercial transaction even though it can be of considerable financial importance. Thus, despite the frequent use of the term, the classification of the ante-nuptial agreement between Miss Radmacher and Mr Granatino as a contract is indeed problematic. Only Rix LJ addressed the question of the application of contract law, saying ‘we are considering an agreement: but should we look at it as though it was a contract, in terms of contract law?’Footnote 49
As Baroness Hale observed in MacLeod v MacLeod, in the long term, enforceable marital property agreements should be introduced by the legislator. The nature of such agreements and the question of whether consideration would be required and what could be considered to be consideration would depend on the form chosen by Parliament. For the moment, however, if one wanted to classify such agreements as contracts, one could either rely on the traditional marriage consideration, or consider the mutual waiver of rights to ancillary relief as consideration. However, the application of general contract law might not be adequate at the moment, when the legal validity and enforceability of the agreement is so uncertain. It might be more appropriate, therefore, just to define marital property agreements as special agreements and not as contracts.
These problems illustrate, however, that marital property agreements are somewhat at odds with English legal tradition. Reasons for the long standing refusal of English courts to enforce such agreements might be found in the English legal approach to contracts and marriage as such. In English matrimonial law, marriage is traditionally seen as creating a status which the parties are not free to vary at will.Footnote 50 At the time of Blackstone, husband and wife were still seen as a unity.Footnote 51 Only since 1882 has the Married Women's Property Act prevented the wife's loss of her property the moment she signed the register, though settlements had previously ensured the financial independence of wealthy women.Footnote 52 This ‘unity theory’ sits uneasily with the idea of the parties concluding contracts inside that union. It denies the most basic prerequisite of any contractual agreement: the existence of two parties.
Though the unity theory has lost its grip on English couples, it might still influence the way marriage, contracts concluded in a family context, and pre-nuptial agreements are regarded. This might be one of the reasons why, despite the frequent use of the word ‘contract’ in Radmacher v Granatino, there is a considerable reluctance in English law to detect contracts and transactions in very personal affairs. The intention to create legal relations, for example, is doubted in the family context.Footnote 53 Recently, Lord Neuberger speaking extra-judicially,Footnote 54 explained Cobbe v YRML and Thorner v Majors by differentiating between family and commercial contexts. The difference was also stressed by Baroness Hale in Stack v Dowden.Footnote 55 It seems an interesting development that, with respect to equity, the judiciary stresses the specific needs of familiar relationships while ‘adult autonomy’ is stressed in favour of ante-nuptial agreements. It will be argued later that there should not be an all or nothing approach. Marital property agreements do indeed require a different approach from commercial transactions, but this should be no reason to deny judges the ability to give them decisive weight in court. With regard to English legal history, it does not seem surprising, however, that such agreements have for a long time been regarded as contrary to public policy.
B. Public Policy
Both the Privy Council in MacLeod and the Court of Appeal in Radmacher agreed that separation agreements could not be considered to contradict public policy because there was no longer any enforceable duty on the couple to live together. However, according to the decision of MacLeod v MacLeod, pre-nuptial agreements are still considered to contradict public policy. At the Court of Appeal, Thorpe, Rix and Wilson LLJ accepted this decision though stating they would have seen merit in a ‘presumed validity’.Footnote 56 Nevertheless, they gave the agreement between Miss Radmacher and Mr Granatino decisive importance when ruling on ancillary relief.
If the Privy Council's point of view on pre-nuptial agreements were convincing, it would be necessary to allow an appeal of the husband to the Supreme Court. If such an agreement were void because it violated public policy, it would be ‘dead’, non-existent in a legal sense, and should not have the considerable effect given to it by the Court of Appeal. To consider it void and immoral, but to give it such decisive importance nevertheless, is a schizophrenic situation indeed. Thus, the question should be addressed whether the view that pre-nuptial agreements contradict public policy is still convincing in principle. Is the whole of continental Europe and most of the common law world perhaps on the wrong path in allowing such agreements?
C. Facilitating Divorces
The traditional approach in many legal systems, not only in England, was that marital property agreements violated public policy because they facilitated divorces.Footnote 57 Today, the argument has become unconvincing, especially in countries like Germany, which have introduced no-fault divorce. This is not the case in England so far; however, if the parties agree, a divorce is available even more quickly and easily than in Germany.
If the legislator wants to impede divorces, another divorce system should be introduced, one which does not allows divorce at all or allows it in very limited circumstances, for example after actual proof of infidelity is presented in expensive and cumbersome proceedings in court. This however, is certainly not what the law over recent years has done. It seems that judges are happy to make consent orders to speed up proceedings and to save time and money for the parties. So if it is public policy that divorce should be available to the parties without unnecessary hazard for them and their children, it cannot contradict public policy when they conclude marital property agreements to make divorce even easier.
Moreover, if this argument were right, separation agreements should be as void as pre-nuptial agreements. By allowing people to conclude separation agreements, the law enables them to divorce more quickly, while a pre-nuptial agreement is concluded when the couple want to get married and thus hope at least never to use it.
D. A Price for Marriage: Pre and Post-Nuptial Agreements
In MacLeod v MacLeod, Baroness Hale's main argument for rejecting the validity of pre-nuptial agreements was that such agreements could enable the parties to ask for a price for getting married. Rix LJ summarised this point as follows:'whether one party to a prospective marriage can lawfully extract a price for entering into a marriage: a ground of policy which might be said to go to the heart of any regard being paid to a pre-nuptial agreement at all.'Footnote 58
At first glance, this argument seems convincing. People should get married because of love and not ‘buy’ spouses with waivers of their rights to ancillary relief. However, at the time of marriage, rights to ancillary relief do not yet exist, so, before the wedding, it is problematic to argue that these rights are already a property of the spouse with which to trade. Moreover, the situation before and after the wedding is not so different. As Rix LJ explained,Footnote 59 it might be better to agree on everything necessary before the wedding rather than to enter a marriage based on erroneous understandings which later cause disappointment. Finally, a party can extract a price for getting married as well as for staying married,Footnote 60 or a price for a quick divorce by agreeing to a generous settlement. It is difficult to see why the first is more immoral than the rest. If the current law in fact allows a person to extract a price for staying married or for a quick divorce, only preventing a person extracting a price for getting married does not make sense.
Nevertheless, it should not be denied that very problematic situations can arise when one party insists on having a pre-nuptial agreement and wants to get married far less urgently than the other party: for example, where a pregnant woman is poor or lives in a very conservative family and agrees to waive all her rights to ancillary relief to convince her boyfriend to marry her. This situation is especially problematic if it is clear that the pregnant bride will become a full-time housewife and never able to earn money on her own. This is certainly not an agreement any judge would or should enforce happily. However, as cynical as it may sound, the boyfriend might argue that he has no duty to marry and that the bride might still be better off married with a pre-nuptial agreement.Footnote 61 It could be replied that if people decide to get married, they have to agree to be ready to take on a minimum of responsibility for their partner.
At this point, there is a risk of confusing the question of the agreement's content, which leaves a poor housewife with nothing at the time of divorce, with the fact that the unsympathetic groom insisted on concluding a pre-nuptial agreement. Agreements with such problematic content could be considered unenforceable by the judiciary as long as the legislator has not introduced proper safeguards, a point which is discussed further below. However, insisting on a pre-nuptial agreement in itself is not necessarily appalling behaviour, as long as this party does not exploit his or her position by dictating a contract with improper content.Footnote 62 If a legal system accepts such agreements in one way or another, by giving weight to them, it cannot be a violation of public policy to insist on concluding one. Moreover, it can be argued that a person who wants to protect him or herself against a ‘gold-digger’ deserves more understanding than someone who gets married with an eye on the partner's money. Would it have been considered immoral if Paul McCartney had concluded such an agreement before marrying Heather Mills? It is understandable that Miss Radmacher did not want to have a similar problem.
E. Too Risky?
A reason given in Hyman v Hyman for not enforcing a pre-nuptial agreement was that the couple could, by its agreement, heap family obligations on the State. ‘The wife's right to maintenance is a matter of public concern, which she cannot barter away’, said Lord Buckmaster.Footnote 63 Judges and the legislator can prevent parties eligible for spousal support from receiving social benefits just because of a waiver of their rights to ancillary relief and thus limit the risks of marital property agreements for the public purse. The steps courts and the legislator might take to ensure a minimum of fairness in marital property agreements will be discussed in detail later in the article. However, risks for the individual could not be prevented altogether. Even if a spouse can support him-or her-self after a divorce, as Mr Granatino can, there is always the risk that he or she could have received much more (or less, depending on the agreement) if the agreement in question had not been concluded. The mere fact that an agreement could be risky, however, is generally no reason to deny its conclusion. Not only in matrimonial law but also in commercial law, agreements can be risky. In both cases, parties can waive or modify rights which could be of great importance to their economic future. However, the courts generally enforce such agreements, while they deny the validity of marital property agreements.
Arguments against binding marital property agreements can thus be countered. However, it cannot be denied that marital property agreements have risks and disadvantages. Often enough, the proposal to conclude such an agreement should be a reason for a woman or a man to think hard whether he or she should marry the intended one after all. So why should the law accept such agreements, even just by giving weight to them when deciding on ancillary relief? Baroness Hale expressed her doubts and held that the reasons for couples concluding such agreements should be addressed.Footnote 64 If couples after White v White and Miller v Miller and McFarlane v McFarlane wanted to conclude marital property agreements, because they opposed equal sharing, it would need to be discussed, Baroness Hale argued, whether equal sharing in marriage was such a good idea after all.
As laudable as a thorough discussion of the English system of ancillary relief might be, this is not the question to be answered. To start with, a legislator or court may have excellent reasons, for example the protection of spouses that stay at home with children, to decide that sharing is generally a favourable approach, while some spouses may have equally good reasons to favour a different model for their marriage, for example if both of them have careers. On a more general level, however, the question is rather whether the legal system considers husbands and wives or the parties to civil partnerships capable of making their own choices in relation to ancillary relief. It is not the question what choices the legislator and judges should make with respect to ancillary relief, but who is allowed to make the choice. This question was answered by their Lordships in Radmacher v Granatino by reference to the old fashioned idea of private autonomy. Rix LJ said, for example: ‘while the public interest in a fair and just exercise of the court's discretion remains, there is fairness and justice too in a proper appreciation of party autonomy: and that there are dangers in overly paternalistic or patronising attitudes ’Footnote 65
V. AUTONOMY REVISITED
All three Lord Justices deciding Radmacher v Granatino referred to autonomy as the ultimate explanation for why the parties’ agreement should carry decisive weight. Thorpe LJ for example said: ‘Due respect for adult autonomy suggests that, subject of course to proper safeguards, a carefully fashioned contract should be available as an alternative to the stress, anxieties and expense of a submission to the width of the judicial discretion.’Footnote 66 English judges are not the first to recognize ‘autonomy’ as the ultimate explanation for the binding force of agreements of all kinds. The idea of the autonomy of the person, so relevant to 19th century contract law, seems to be relevant to answer the question why marital property agreements should be given at least some weight.
The German codification of civil law, the Buergerliche Gesetzbuch (BGB) was drafted in the late 19th century, at a time when the ideas of liberalism, the will theory and private autonomy were of particular importance for legal development.Footnote 67 At that time, the autonomous decision of two individuals in a mutual agreement was held to provide a sufficient basis for the enforcement of a contractual agreement, without inquiring into what courts or legislators would consider just or reasonable.Footnote 68 The political implications of this principle contrasted with the paternalistic regimes of the 18th century.Footnote 69 Kantian philosophy challenged the assumption that moral principles could be ascertained.Footnote 70 Self-determination and responsibility were advocated instead as a decisive aspect of humanity. To question the self-determined decision of persons, even with the aim of protecting their interests, would mean to question their dignity.Footnote 71 These influences can be seen in the 19th century academic writing on private law, especially in Savigny's work.Footnote 72 German private law, especially the BGB, was profoundly shaped by these Kantian ideas. The law assumed equal legal freedom of all people without differentiating between income, education and social background, and without questioning the sensibleness of their decisions.Footnote 73
The importance of freedom of contract in the commercial context is widely accepted, even by laypersons. Autonomy in matrimonial law is a more difficult subject. Economic analysis understands the contract as a necessary mechanism for the efficient allocation of goodsFootnote 74 in a free market-economy.Footnote 75 Such arguments cannot be used to claim that the courts should enforce marital property agreements. The idea of private autonomy did not stop at commercial transactions, however. Though marriage was seen in the 19th century as a ‘pre-legal, moral unity of the partners’,Footnote 76 the legislators of the 1900 BGB emphasised that the matrimonial property regime could be modified. In the ‘Motive’, where the new code was explained, the following passage can be found:Footnote 77
The principle of freedom of contract has always been accepted in German matrimonial property law. The German legal consciousness demands that spouses should be allowed to arrange their matrimonial property freely within the moral boundaries of the moral nature of marriage.Footnote 78
There were, however, pragmatic considerations as well. Before the BGB came into force, there were more than 100 different matrimonial property regimes in the various German states.Footnote 79 Only five of them were included in the BGB.Footnote 80 By providing for marital property agreements, the code sought to accept the same diverse outcomes by means of agreements, thereby cushioning the acclimatization to the unified property regime of the BGB.Footnote 81 Sir Mark Potter's remark in Charman v Charman,Footnote 82 that the refusal of English law to enforce marital property agreements could complicate today's harmonisation of European family law, is interesting in this context. With this compromise, the drafting of the BGB accomplished two aims: on the one hand, marital property agreements made it possible to unify matrimonial property law in the BGB, and not to leave the subject to the different German states;Footnote 83 on the other hand, freedom of contract in matrimonial law integrated family law into the liberal concept of the whole BGB.Footnote 84
Nevertheless, the German approach should not be mistaken as an attempt by the German legislator to achieve equality of men and women. The default matrimonial property regime the BGB introduced in 1900 gave the husband an exclusive right to the use and administration of his wife's property. At the time when the German legislator mused over the political and doctrinal advantages of marital property agreements, in England, Parliament in the Married Women's Property Act 1882 finally abolished the same rights of English husbands to the property of their wives.Footnote 85 The early German movement for women's rights tried unsuccessfully to achieve what had just been given to English women. It needed the introduction of the Basic Law, the German constitution of 1949, to render the default property regime unconstitutional and to force the reluctant legislator to introduce a new one.
However, when adjusted with regard to the equality of men and women, the ideas of the legislators of the BGB could still be of interest today. The parties themselves are to decide why and how they marry and how they want to organise their union and the financial effects of their relationship's breakdown. Marital property agreements can serve as a means to replace the judge's discretion by the parties' discretion. If the ability to marry and organise this marriage at will is understood to include the freedom of the parties to decide about the future financial organisation of their lives after the marriage, the freedom to modify rights to ancillary relief appears almost as important as the freedom of contract in commercial law.
In Strong v Dubin, the New York Supreme Court summarised this idea as follows: ‘A strong public policy favours individuals who order and decide their own interests through contractual arrangements, including prenuptial agreements.’Footnote 86
VI. PARTNERS AND PARTNERSHIP
It has been argued that the reasons which justify the enforcement of commercial contracts also apply to marital property agreements. It might be replied, however, that marriage is entirely different from commercial transactions which are usually concluded to rule short-term transactions between business people while marriage is about love and should last a lifetime.
Keeping this in mind, it seems surprising that the analogy between partnership law and matrimonial law has been drawn recently by an eminent English family lawyer. Professor Cretney has argued that the House of Lords in White v White construed the terms of the married couple's ‘partnership agreement’ when introducing the famous ‘yardstick of equality’Footnote 87 in matrimonial law. Section 24(2) of the Partnership Act 1890 establishes that every partner is entitled to an equal share of the partnership's profits. Since White v White and Miller v Miller and McFarlane v McFarlane, the starting point in matrimonial law is equal division of property after the parties' needs have been met.Footnote 88 Drawing an analogy between partnership agreements and marital property agreements, Cretney concludes that the parties should be free to contract out of equality in the same way that partners can modify by agreement the default rule of section 24(2) of the Partnership Act 1890.
The analogy between partnership and marriage may be surprising. Family law and company lawFootnote 89 are two entirely different animals. However, Cretney is certainly not the first to draw this comparison. It has already been explained how marriage was described as a contract in continental law and how this notion helped the idea that the partners should be free to modify the rules of that contract. Even though views which put morality and religion in the centre of the definition of marriage always existed, the comparisons did not even stop at the contract, however. Natural lawyers like Christian Thomasius and Christian Wolff discussed in the 18th century whether marriage was to be seen as a societas and personae moralis, a personality created by law comparable to that of a company.Footnote 90 The enlightenment was not the only time when matrimonial law took inspiration from company and partnership law. In German legal history, this was done repeatedly when the law met new challenges. The aim of such comparisons was to enable discussion and legislation on family law free from traditional constraints.Footnote 91 With the emergence of the modern State, law applicable to all citizens irrespective of their religion and views became necessary. Today, as our societies become more and more diverse and international, the need for a family law open to different approaches and views on marriage is becoming more and more important. A comparison between partnership and marriage could be one step in the process of a creative rethinking of family law.
Under the unemotional microscope of the lawyer, marriage's structure can be compared to that of a partnership. The common idea of a partnership is of people coming together and joining their resources for a long-term project. In both cases, this project has economic implications; it is obvious when it comes to a partnership which is founded for a commercial purpose. But a family too requires as much organizational effort as a small business. It might be more than a mere coincidence that the words ‘partner’ and ‘partnership’ are both used for a personal union as well as for an association of businessmen. Richard A PosnerFootnote 92 and Gary S BeckerFootnote 93 have classified the family as an important economic institution.Footnote 94 In both cases the dissolution and the sharing of jointly acquired property becomes an issue as mutual trust is destroyed when the ‘partnership’ breaks apart.Footnote 95
For partnerships, however, it is possible to agree on the future dissolution of the association in a partnership agreement. Why then, should not agreements—Professor Barton speaks of ‘domestic partnership contracts’Footnote 96—be concluded in both situations about how property is to be divided if the partnership does fail? For the organization and dissolution of this ‘partnership of equals’,Footnote 97 partners themselves are the best experts.
VII. AUTONOMY AND FAIRNESS
It was submitted that English law should allow the enforcement of marital property agreements, either by means of a decision of the Supreme Court or —preferably—through statute. Until such a statute is introduced, courts should give decisive weight to such agreements, when granting ancillary relief. However, this conclusion should not close the discussion.
The aim of proceedings for ancillary relief is to achieve a ‘fair result’. However, fairness, like beauty, as Lord Nicholls of Birkenhead conceded in White v White,Footnote 98 lies in the eye of the beholder. Marital property agreements enable parties to a marriage to decide for themselves what would be fair if the parties were to divorce. Should the law step in to protect the parties from their own choices and allow the judge some discretion to grant ancillary relief irrespective of an agreement the judge considers unfair? These doubts show that the ideas underlying freedom of contract have lost some of their sparkle since the 19th century.Footnote 99 Parties in a marriage are not businesspeopleFootnote 100 and thus there is a greater need for protection. Moreover, the possible negative impacts that such agreements may have on the parties' children must be considered.
A. Waiting for the Legislator—English and German Courts
It would be desirable if the legislator offered carefully designed limits for marital property agreements. But so far, neither in Germany nor in England is this the case. German law only provides that marital property agreements are possible. The situation is different, in that English courts have to decide whether to take marital property agreements into account whereas German courts must determine when an agreement should not be taken to account; both courts have to adjudicate on which agreements they accept while they are waiting for the legislator's helping hand. With caution and insight, English judges have already named most of the possible problems to be considered both by judges and legislators on both sides of the Channel. Three main groups of problems can be distinguished and were elegantly classified by Rix LJ in Radmacher v Granatino: ‘It may be difficult to say what is meant by fairness: is it the fairness in the content of the contract, in the circumstances of its making, or in the circumstances which have come about?’Footnote 101
German courts have needed much longer to develop such sensitivity.Footnote 102 Now, however, German case law might be interesting for English courts and the discussion on martial property agreements in general. German courts developed case law to control marital property agreements, taking general contract law as a starting point. When evaluating marital property agreements, German courts differentiate, like Rix LJ, between the time the agreement was concluded and the time of its application. First, German courts question whether an agreement was valid at the time of its conclusion. The court investigates whether one of the spouses has been in an inferior bargaining position which caused him or her to agree to a marital property agreement substantially restricting his or her rights.Footnote 103 If this is the case, the agreement is void because of § 138 (1) BGB.Footnote 104 In such case, the court applies the rules of maintenance, pension sharing and the default marital property regime as if there had never been an agreement.
If the court considers an agreement valid, it moves on to the second step. Now, the court looks at the situation at the moment of divorce and examines whether the matrimonial agreement can be enforced according to § 242 BGB, the duty that all contracts have to be performed in good faith. Here the court considers whether the enforcement of the agreement in question would cause an unacceptable distribution of relationship-generated disadvantages.Footnote 105 If the court is convinced that an agreement is unacceptable as it is, it will not enforce as much of it as it considers necessary to produce a fair result in the individual case. Though the doctrinal structure is different, the evaluation of the enforceability of a marital property agreement by a German judge shows some similarities with the discretion an English judge under the Matrimonial Causes Act 1973.
B. Circumstances of the Contract's Making
Marital property agreements are complex. A person without a legal background may struggle to understand such agreements and their possible implications. Any future law of marital property agreements could seek to ensure that adequate information and legal advice is provided. Agreements entered into by mistake should be avoided and the financial situation of each spouse could be disclosedFootnote 106 along with other relevant information. Formality requirements, for example requiring that agreements must be in writing or notarised, not only help in providing evidence—should this be necessary—but also make it clear to the parties that they are engaging in a potentially risky agreement. In this regard, the continental law and Uniform Premarital Agreement Act (UPAA)Footnote 107 could be taken into account.
For the moment, without any English formality rules, English judges can take the fact that the parties have taken legal advice and have thought about and discussed their agreement at some length as a sign of their determination and their intention to create legal relations. Their Lordships did not consider the fact that Mr Granatino had no full understanding of his wife's wealth and only learned about the agreement's content through the notary's translation to be a problem, but generally the fact that one party did not understand the agreement properly at the time of its conclusion should cast doubt on its application.
However, formality requirements and advice are not always enough to ensure just outcomes. The legislator should think carefully before introducing formality requirements without providing some rules with respect to the agreements' content. Sometimes parties do understand the agreement but are not able to negotiate effectively, for example a pregnant woman from a traditional family who feels the need to get married, or a fiancé without right of residence in the UK who fears deportation. At this point, the problem discussed above of the ‘price for entering into a marriage’Footnote 108 comes into focus again. As already argued above, however, this should not necessarily be a reason not to give weight to the agreement. If we accept that parties should be allowed to conclude such agreements, there is nothing wrong in one party making such an agreement a precondition to getting married, as long as this party does not exploit his or her position by dictating a contract with improper content. Outside the established principles of duress and undue influence which could be taken into account when evaluating marital property agreements, the question whether to conclude a marital property agreement at all should be a personal, not a legal question. What should be a legal question is what content the parties may agree on.
C. Content of the Contract
Without guidelines from a helpful legislator, the question what content is acceptable must depend on the individual case. The interests of three different groups—the spouses' children, the state and the spouses themselves have to be kept in mind in the process.
1. Third parties
The Court of Appeal accepted a complete waiver of all rights in Radmacher v Granatino. Miss Radmacher was a wealthy woman and Mr Granatino a man with high earning powers. The courts did not accept, however, that the agreement affected the parties' children. That must be right. If a person is clearly able to take care of his or her own financial needs, there is a lot to be said in favour of private autonomy. But the situation should certainly be different for the parties' children who have no voice when a marital property agreement is concluded. Their interests must be properly protected. The situation is not different in Germany. Parents cannot contract on the maintenance for children. Moreover, as long as one spouse needs maintenance so that he or she does not need to work but can take care of the children, such maintenance should be granted irrespective of the agreement. Another third party which might be affected by an agreement is the state. If a party does not receive maintenance, he or she can become eligible for social welfare. This is another situation where a court might give less weight to an agreement and exercise the discretion given under the Matrimonial Causes Act 1973.
2. Spouses—needs, compensation and sharing?
To determine the boundaries of private autonomy in matrimonial law between the spouses, it is helpful first to determine the purposes of the law of ancillary relief and then decide on their relative importance. This however, is easier said than done as the English law of ancillary relief is currently as much under development as the weight judges give to marital property agreements in the process of defining ancillary relief. Under sections 23–25 of the Matrimonial Causes Act 1973, the courts can order a transfer of wealth from one spouse to another. However, as Lord Nicholls emphasized, the claimant is not to be seen as a supplicant.Footnote 109 According to Miller v Miller and McFarlane v McFarlane, ancillary relief aims at meeting the parties' needs, compensating any disadvantages caused by the marriage, and equal sharing.Footnote 110 English courts still consider meeting the spouses' needs the most important function when deciding on ancillary relief, applying the other two only in the rare cases of ‘super-rich’ couples. Thus, it would be possible for English courts to focus on needs when deciding on whether to take a marital property agreement into consideration. A possible solution could be that at the moment the parties conclude the agreement, they must be relatively sure that they will be able to meet their reasonable needsFootnote 111 in the future.
Germany has taken a slightly different route, however. German law more or less embraces the same underlying purposes of ancillary relief as English courts—needs, compensation and sharing. Therefore the principles that German courts have developed might be of interest for English courts. When deciding on the limits of freedom of contract in matrimonial law, the Federal Supreme Court (Bundesgerichtshof, BGH) held that a waiver of rights to ancillary relief was the more problematic the more such rights were meant to meet the spouses' needs. Thus, it is more problematic to waive a right to maintenance, than it is to waive rights to marital property. Recently, however, the court has placed more and more emphasis on the compensation of marriage-caused disadvantages.Footnote 112 The more likely it is at the time a pre-nuptial agreement is concluded that a spouse will need ancillary relief to compensate disadvantages caused by the way the marriage will be organized, the more likely it is that a court will consider such an agreement as contradicting bones mores and void.
For example, in the BGH's decision of 9 July 2008, the parties had planned a traditional marriage. The couple agreed that the wife should not work but take care of the house and children. Nevertheless, the wife waived all her rights to the husband's pension rights, her share of the marital property and of maintenance exceeding her pre-marriage salary. The court decided the whole agreement was void. Though the agreement was acceptable with respect to maintenance and marital property, the fact that the wife would not receive a share of the pension rights and would thus be unsecured in her old age was considered unacceptable. Since the parties knew that the wife would not work and would thus have no pension rights and no money of her own, it was clear that severe marriage-caused disadvantages would develop. Such disadvantages would have had to be compensated to make the agreement acceptable. The waiver would not have been regarded problematic, however, if the parties had been past the age of possible childbearingFootnote 113 or had not expected to have a family and intended to earn money during the whole marriage.
Applying the principles extracted from German case law to the facts of Radmacher v Granatino, it can be assumed that a German court would have upheld the agreement. Husband and wife were both financially secure at the time the agreement was concluded. The couple did not plan a marriage which would have caused any disadvantages to them they could not have afforded. Even if the parties had already considered the possibility that Mr Granatino would go back to Oxford for a DPhil, that would not have made the agreement problematic, because it would have been his decision alone to study and not something he wanted to do for the family. The situation would have been different, however, if the parties had planned that Mr Granatino should stop working as soon as a child was born to take care of the baby. In this situation, where the couple had planned that the husband would suffer disadvantages in his earning power caused by the marriage, an agreement which did not ensure that his needs were secured later, would have been problematic. The parties would have been free, however, to conclude an agreement under which the husband was entitled to smaller payments than under statutory rules as long as his income was not significantly smaller than before the marriage.
This shows that compensating disadvantages caused by the marriage and meeting the spouses' needsFootnote 114 are considered important in German case law, while the parties are allowed to waive their rights to equal sharing. This is not to say, however, that the idea of ‘equal sharing’ as such is a bad one. It is important to avoid discrimination against the home maker and child bearer. But the situation is different when the home maker has decided him- or herself that he or she does not want the share as long as he or she receives maintenance and some means to make provision for his or her old age.
Of course, this solution might not be the best approach for an English court. However, it seems reasonable that as long as there are no statutory criteria to evaluate marital property agreements, a judge should retain discretion to disregard such agreements which have been concluded without regard to forseeable needs caused by the way of life the parties had planned together. In such a situation, where an agreement is clearly the result of one side's bargaining power and does not take into account the interests of the other side at all, there is no need to give much weight to it.
3. The circumstances which have come about
A family is an ever-changing, ever-developing, long-term entity. This brings special problems. Again, Rix LJ in Radmacher has identified the issue:
A pre-nuptial agreement is intended to look forward over the whole period of marriage to the possibility of its ultimate failure and divorce: and thus it is potentially a longer lasting agreement than almost any other …. Over the potential many decades of a marriage it is impossible to cater for the myriad different circumstances which may await its parties. …. However, equally or more typical will be the marriage of young persons, perhaps not yet adults, for whom the future is an entirely open book. If in such a case a pre-nuptial agreement should provide for no recovery by each spouse from the other in the event of divorce, and the marriage should see the formation of a fortune which each spouse had played an equal role to in their different ways in creating, but the fortune was in the hands for the most part of one spouse rather than the other, would it be right to give the same weight to their early agreement as in another perhaps very different example?Footnote 115
Indeed, there are only a few legal relationships which last as long as marriages do. Others are partnerships, some employment contracts, and long-term leases. They all share some common features. Long-term relationships, especially partnerships and marriages, evolve their individual characteristics through the parties' day-to-day decisions, which adjust such relationships in the context of changing circumstances. This is different from many other contractual relationships, for example contracts of sale, which have as their aim the exchange of certain goods or services. The purpose of a partnership or marriage is rather, to offer a legal framework for the parties' ongoing joint activities and work. ‘The journey is the reward’ it could be said.
Within their married life, couples inevitably need to adjust and develop their relationship in response to changing circumstances. Such developments may mean that an agreement, which was completely reasonable when concluded, could lead to a manifestly unfair result at the time of divorce.Footnote 116 If a couple had children despite their initial plans, and the wife stopped working to take care of them, the marital property agreement could mean that she is left with nothing on divorce.Footnote 117 Another difficult example is where the parties work hard together to build up property even though a marital property agreement precludes a judge from distributing those profits equally on divorce.
It could be argued that a husband or wife who is imprudent enough to stop working, or helps his or her spouse to build a fortune knowing that he or she will receive nothing in case of divorce, should be left to his or her fate. After all, contractual agreements of any kind are only useful when they enable the parties to establish binding rules for the future.Footnote 118 To quote Hoffmann LJ (as he then was) ‘a contract … must be performed come what may.’Footnote 119 However, these observations, which are certainly convincing in the commercial context, can be somewhat problematic in the family context, as Rix LJ rightly observed.
To a certain extent, the problem could be solved through careful drafting. For example, the parties could agree that their agreement shall cease to be binding if a spouse stops work to take care of the family. The agreement could also include alternative clauses providing for the possibility of children. However, parties who are in love and ready to get married or parties who are still happily married might underestimate the chances of their relationship changing or their needs from that relationship changing.
In the theory of New Institutional EconomicsFootnote 120 terms like ‘faulty telescopic faculties’ and ‘faulty risk-estimation faculties’ describe the phenomenon that people making decisions pay too little attention to future developments and risks.Footnote 121 Professor Eisenberg has applied this theory to legal problems in long-relationships.Footnote 122 According to Eisenberg, long-term contractual relationships, like marriage, partnership, small limited companies, and employment contracts, which are based on a relationship of trust between the parties, are especially susceptible to the problems caused by defective risk-evaluation.Footnote 123 He refers to various statistic and psychological research projects, which show that people often underestimate future risks, even if they have an overall understanding of the amount of potential losses. Baker and Emry for example discovered a dramatically false estimation of future risks in a study with the apt title ‘When Every Relationship is Above Average’.Footnote 124 Baker and Emery questioned young men and women before their wedding. Although the young people were familiar with divorce rates, proceedings for childcare, contact orders, and the difficulties and the statistics on the payment behaviour of spouses ordered to pay maintenance, they thought the probability that their own marriage would end in divorce was nil. If they were asked how their prospective spouse would behave in divorce, the majority answered that his or her behaviour would be above average, so that the spouse would pay maintenance without delay, and would leave children and property unequivocally to the interviewee. The same picture is painted by German notaries who often mention the naive optimism fiancées and newlyweds show towards a possible future divorce and the possibilities to coordinate work and children. This positive approach towards a prospective marriage is understandable (it would be rather worrying if parties did not believe in their marriage on their wedding day) but probably leads to unrealistic optimism.
It could be argued that the couple should adjust their marital property agreement to new developments whenever it is necessary. It is certainly desirable that the parties do so; however, it is to be expected that not all will do so. As long as the marriage is going well, each party has reason to trust that the matrimonial agreement will never be needed. And if the relationship declines, a party may refrain from bringing up the point in order not to make matters worse, as the wish for renegotiations may be understood as a questioning of the relationship. This situation can be compared to the situation of Mr David Thorner in Thorner v Majors who did not dare to ask his cousin Peter Thorner whose farm he hoped to inherit for a clear promise that the farm would left to him.Footnote 125
It cannot be denied that there is a tension between the ever-changing family and the binding agreement which aims at providing rules for its dissolution. It might be argued that these considerations do not allow for agreements on which the parties can actually rely. Rather than fighting over the assets, parties could start fighting over their pre-nuptial agreements. It might be said that these problems call the desirability of pre-nuptial agreements into question and show the merits of the English law of ancillary relief where a judge retrospectively determines the rights to ancillary relief with respect to the individual marriage the couple has lived. One should not go so far, though it can be admitted that finding the right balance between flexibility and predictability is one of the most difficult problems in relation to marital property agreements.Footnote 126 After all, not every kind of development should justify a marital property agreement's adjustment.
The cases of Radmacher v Granatino as well as Miller v Miller and McFarlane v McFarlane provide helpful examples. Mr Garantino quit his well-paid job at JP Morgan to do a DPhil at Oxford. Even though this change of career is very understandable, despite their thoughtful observations, their Lordships did not consider this enough to prevent giving considerable weight to the agreement. The birth of the two daughters was not considered such a development either. But what would then? The decision can be explained by the fact that the development did not cause any disadvantages for Mr Granatino. To quit his job was his decision alone and the children's birth had no effect on his income.
The decision should have been different if Mr Granatino's situation had been more like Mrs McFarlane's.Footnote 127 To recall the facts, Mrs McFarlane was a successful solicitor before she and her successful husband decided that she would stop working to stay home with the children. Taking into consideration Rix LJ's judgement cited above, in such a situation, a previous marital property agreement cannot be the last word. The reason is that in the McFarlane case the situation was changed due to a joint decision of the parties in favour of the family. In a normal contractual relationship, it could be argued, such changes should be the problem of each party alone. The importance of the parties' division of labour and their mutual dependence in marriages can be highlighted by the late Ian Macneil's theory of ‘relational contracts’, however. Whilst Macneil's theory has often been criticised, with some questioning its usefulness in generalFootnote 128 and others denying the general application of the concept,Footnote 129 it is not argued that this approach is useful to explain all kinds of contracts.Footnote 130 However, it can be helpful to understand the importance of the changing personal relationships within marriages and partnerships.Footnote 131 The division of labour in the family is, according to Macneil, the preliminary model for all sorts of long-term contractual relationships. Division of labour, Macneil states, leads to a general expectation of reciprocity and mutual responsibility. The more labour is divided within a relationship, the more parties will become dependent on each other. The parties, Macneil argues, increasingly develop the sense of being part of a unit with interests identical with their own. Parties believe that the benefits and burdens of the relationship are to be shared, rather than divided and allocated.Footnote 132 Because persons disregard their own interests in favour of the group, they expect others to behave in the same way. According to Macneil, this is not only true for marriages but also for small partnership, another reason why the comparison between marriages and partnerships made earlier in this article could be interesting. The negative effects of such joint decisions should not be placed on one party alone, at least not as long as the legislator has not considered the whole problem carefully and introduced rules with respect to marital property agreements. Until then, some disregard of the parties' marital property agreements and thus the private autonomy expressed in them is tolerable because their later decisions are considered and given some weight alongside with the agreement.
Every legal system has to find the right balance between enforcing marital property agreements and the demands of changing relationships in a family context. The German BGH has developed a solution relying on § 242 BGB, the principle of good faith. If a situation has developed so that one party cannot meet his or her present or future needs because of the division of labour within the marriage,Footnote 133 the other partner is estopped from relying on the contract so far as circumstances have changed. To ask for an enforcement of the whole agreement is considered to be an abuse of rights which a court will not allow.
This solution might not provide the right answer for English law, which does not embrace a general duty of good faith between the parties of a contract,Footnote 134 though fiduciary duties can exist between the partners of a partnership. A possible solution for the legislator would be to introduce a rule that the reasonable needsFootnote 135 of each spouse must be satisfied on divorce despite a marital property agreement. This approach could ensure that children are not affected indirectly by their parents' agreement. It could also prevent a person needing to rely on state support as a result of the terms of a marital property agreement. This issue was raised in Hyman v Hyman as a reason not to enforce marital property agreements in the first place.Footnote 136 Section 6(b) of the US UPAA sets out such a rule: notwithstanding the terms of a ‘premarital agreement’, a court may require a spouse to make support to the extent necessary to avoid a situation where the elimination or modification of spousal support makes the other spouse eligible for support under a ‘program of public assistance’.
As long as there is no legislative answer to these questions, a judge should at least retain discretion to re-adjust property arrangements inasmuch as necessary to ensure that, firstly, neither children nor the social welfare system will suffer under the agreement and, secondly, no divorced spouse alone has to bear the effects of choices the parties made together during their married life. The Radmacher case is an illustration of a case going in this direction.
D. Marital Property Agreements and Family Constructive Trusts
Whatever road English courts and the legislator might choose to take, it seems important at this point not only to look at family law when discussing the effects marital property agreements might have on the legal system. Legislators and courts should be aware of possible interactions between family law and property law.
Rix LJ said:
If … a pre-nuptial agreement should provide for no recovery by each spouse from the other in the event of divorce, and the marriage should see the formation of a fortune which each spouse had played an equal role to in their different ways in creating, but the fortune was in the hands for the most part of one spouse rather than the other would it be right to give the same weight to their early agreement as in another perhaps very different example? Footnote 137
These words already foreshadow how courts might react if the legislator or courts begin to give weight to marital property agreements irrespective of developments like the joint building of property within the marriage. In Stack v Dowden, their Lordships agreed that the judge's discretion to redistribute property under the Marital Causes Act 1973 has eased, if not solved, the problem of how to ascertain property rights in the family home.Footnote 138 Parties who do not receive a share of a house because of a marital property agreement, however, might argue in the future, like cohabitants, that they hold a beneficial interest in the property under a constructive trust, which should be determined by a judicial search for ‘the result which reflects what the parties must, in the light of their conduct must be taken to have intended’.Footnote 139
Again, a comparison with German case law proves interesting.Footnote 140 In Germany, courts have often inferred that parties who had concluded a pre-nuptial agreement that excluded a sharing of the matrimonial property had since concluded a partnership agreement and thus held equal shares to their house or business as partners irrespective of who was registered. Even if German law does not embrace the trust, this construction can be compared to the English family constructive trust. Similar to the English situation, in Germany the courts have often been accused of imputing the conclusion of a partnership to avoid ‘unfair’ results despite the fact that the parties had never thought of such a partnership throughout their married lives. Thus, it is possible that as soon as the law allows parties to waive their rights to ancillary relief, the family constructive trusts might celebrate a revival. The use of constructive trusts as a means of correcting the results of ‘unfair’ marital property agreements could add more confusion to this already unclear area of law, and should thus be avoided.
VIII. CONCLUSION
The organization of personal life is primarily the product of individual choices. Such choices should be possible not only in relation to the joint lives of couples but also in relation to the financial effects of the breakdown of their relationship. The 19th century idea of freedom of contract and the autonomy of the person seems in many ways to be wholly modern in this respect. A comparison of marriage with partnerships shows that other organizations are also governed by agreements.
Freedom of contract cannot be a freedom without limitations. Particularly in the context of family law, where the parties can be particularly vulnerable, safeguards need to be discussed and introduced. This is an important task which the Law Commission of England and Wales and the Supreme Court now face. Three aspects should be taken into account when evaluating a marital property agreement. All three have been identified by Rix LJ in Radmacher v Granatino: The situation at the time of the agreement's conclusion and the agreement's content are important to consider if the parties approached the sensitive subject with appropriate care and understanding. However, unlike other contracts which are enforced just the way they were concluded, the development of the parties' relationship needs to be considered before a court can give decisive weight to a marital property agreement. As long as the legislator has not introduced proper safeguards, this needs to be done when giving weight to marital property agreements in the context of section 25 of the Matrimonial Causes Act 1973. In the future, it is to be hoped that the legislator will introduce rules which take the relationship's development into account as well as providing for minimum standards and formality rules which ensure that the parties know what they do when entering into a marital property agreement.
‘Radmacher’ in German means wheel-maker. Maybe the decision Radmacher v Granatino will help English courts and the Law Commission to invent something as important and as difficult as the wheel: rules for marital property agreements strong enough to be relied on and flexible enough to roll over the constantly changing landscape of married life.
