Postnuptial agreements

Someone who read my previous article asked me whether prenuptial agreements are better enforced than postnuptial agreements by courts in New Jersey and in New York. Although both types of agreements are routinely enforced, both types of agreements are subject to scrutiny. States have a strong interest in the matters of marriage and divorce and naturally, the parties who sign those agreement have special confidential relationships.

When an agreement is challenged (it never gets challenged by the court, only by a party), there is always a concern about the possibility of unequal bargaining power in a marriage situation. Here is the difference why postnuptial agreements may be subject to higher level of scrutiny. Marital relations often produce situations with unequal bargaining power. When it comes to postnuptial agreements a wife is usually more invested in marriage than a bride who can easily walk away from it (unless she is about to marry Tom Cruiz or Alec Baldwin).

Who generally wants a postnuptial agreement? A postnuptial agreement is often used by a successful businessman who wants to protect his investments and business from the volatility of divorce proceedings. Alternatively, a postnuptial agreement may be used by a wife who is unhappy about her prenuptial agreement and wants to modify that agreement.

The courts scrutinize the agreement by using the standard how much an agreement deviates from an equal split. In a leading case on the issue, Pacelli v Pacelli, a husband offered his wife of ten years far less than she would have received under New Jersey’s equitable distribution rules. He refused to negotiate, presented the offer as a take-it-or-leave-it deal, and “moved out of the marital bedroom.” New Jersey court set aside that agreement. A New Jersey Supreme Court decision to invalidate a postnuptial agreement stemmed from its observation that a wife“faced a more difficult choice than the bride who is presented with a demand for a pre-nuptial agreement.”

New Jersey courts impose on the postnuptial agreement the requirement of meeting the standard of substantive fairness, both at the time of its signing and the time it is ultimately enforced. This requirement is not imposed on prenuptial agreements. Thus, the proponent of the postnuptial agreement has a higher burden to meet.

In my opinion, this is a problem. Nowadays, the parties feel equal self-worth in a marriage. There is less moral inequality in a relationship. When parties have already been married for a number of years, they know better what their marriage is worth, their financial prospects and their needs. There is no reason why prenuptial agreement should get better protection than postnuptial agreement.

In New York, the courts treat postnuptial and prenuptial agreements differently. They limit the enforceability of the postnuptial agreements by imposing a stringent interpretation for consideration. A promise to remain married is not always sufficient consideration for a postnuptial agreement. Where a marriage is experiencing significant strife or a spouse is foregoing a specific career, the consideration to remain married is sufficient. At the same time, if the court finds that merely continuing to be married is no sacrifice for the party seeking to enforce the agreement, such consideration alone is insufficient. The court will look for some other consideration. If there is none, the agreement may not be enforced.

It has been held that “[c]onsideration exists when a party does something that he or she is under no legal obligation to do or refrains from doing something which he or she has a legal right to do.” Isn’t remaining married something none of us obligated to do?

An astute lawyer may draft an agreement so as to hide the “unjust advantage” one party may have over another and avoid going into this highly subjective test.

As more people want to have postnuptial agreements, they often want to use them to regulate behavior during marriage. Thus, many postnuptial agreements attempt to use financial

rewards and penalties to encourage fidelity in the marriage. It is unclear whether public policy allows to make such clauses in New York and New Jersey. Certainly, there is no case law preventing them from doing so in our states. However, some states have found that those clauses create issues of fault which goes against the tendency of no fault divorces.

MAYBE NEW ARTICLE

One can argue that prenuptial and postnuptial agreements are problematic because oftentimes high exit costs keep marriages together. Kobe Bryant and Vanessa Bryant have no prenupt. International business news claims that to Kobe Bryant a divorce to Vanessa Bryant would cost $150,000 million. Even this exit price does not stop the star from engaging in infidelity and risking the marriage! On a serious note, there is no statistics that we know of that says whether prenups or postnups make it more or less likely that the marriage would end in a divorce. Certainly, they make divorces less contentious.

See Zagari v. Zagari, 746 N.Y.S.2d 235, 238 (N.Y. Sup. Ct. 2002),compare with Whitmore v. Whitmore, 778 N.Y.S.2d 73, 75 (N.Y. App. Div. 2004).