The American Law Institute (ALI) on postnuptial agreements

The American Law Institute (ALI) in its Principles of the Law of Family Dissolution (2002) has written standards applicable to postnuptial agreements, i.e., agreements made during a marriage where divorce is not imminent. These principles have been incorporated (or rejected) in many state-court decisions dealing with the enforcement of postnuptial agreements.

What is a “marital agreement”. ALI terms these agreements “marital agreements” to distinguish them from “prenuptial agreements” (agreements made before a marriage) and “separation agreements” or “divorce agreements”, i.e., those that come into effect at the end of a marriage. (All cites herein refer to ALI “Principles of the Law Of Family Dissolution”, 2002 edition.)

A ‘”marital agreement” is defined “an agreement between spouses who plan to continue their marriage that alters or confirms the legal rights and obligations that would otherwise arise under these Principles or other law governing marital dissolution. § 7.01(1)(b). The ALI applies “marital agreements” by analogy to agreements between domestic partners or prospective domestic partners. § 7.01(2)(c) and (3).

Under ALI, Marital agreements have same standards as prenuptial agreements. The ALI takes the position that the principles applicable to marital and premarital agreements are the same and suggests, as some States have done, applying substantially the same standards for enforceability of both types of agreements. § 7.01 and Reporter’s Notes to comment e, citing Reese v. Reese, 984 P.2d 987 (Utah 1999). Some courts, such as the Massachusetts Supreme Judicial Court have held that the higher standards of equity applicable to separation agreements are applicable to marital agreements. See Ansin v. Craven-Ansin, SJC-10548 (July 16, 2010).

Protections against inherent duress provided by shifting burdens and other provisions. The ALI provides that a marital agreement is presumed that it was not made under duress if parties were advised to obtain independent legal counsel, and had reasonable opportunity to do so before the agreement’s execution. § 7.04. This presumption is rebuttable, but it would be difficult to do so, especially if the parties actually did engage separate counsel and consulted with their own attorneys.

A comment to § 7.01 states that there are opportunities for “hard dealing” with respect to marital agreements that “may be greater” than with premarital agreements. § 7.01 comment e.

The ALI therefore provides protection for contracting spouses to a marital agreement. One of these is that in marital agreements, there is a burden on the party that is trying to enforce the agreement to prove it a party’s consent was informed and not obtained under duress. §7.04(2) This shifting of burden permits a court charged with making the decision as to whether to enforce a marital agreement to exercise a “heightened scrutiny” in looking at bargaining process leading to negotiation of the terms of the agreements so there is a higher standard than the bargaining process applicable to commercial contracts, See comment b to §7.04(2).

A marital agreement is rebuttably presumed to be free from duress and the product of informed consent if both parties were advised to obtain separate legal counsel and had reasonable opportunity to do so before execution of the agreement, or if not the agreement is very clear and in plain language for someone with no legal training and it shows the rights altered by the contract and the nature of the alteration. § 7.04(3) (b)(c) and § 7.04(4)(a). Very importantly, the ALI states that a marital agreement is unenforceable if a party rescinds it by a writing delivered to the other party within 30 days of its execution. § 7.04(4)(b).

Consideration to the contract. Surprisingly, the ALI states that consideration is not required to create enforceable marital (or premarital) agreement. § 7.01 (4). See also comment (c).

Full disclosure required. In order to be enforceable, the parties to a marriage agreement must make full disclosure of assets, income, and also assets or entitlements that a party reasonably expects to realize in the near future. § 7.04(5). The disclosure need not be exact, but must approximate the value of the assets.

The ALI specifies that the spouse that the general standards of disclosure above are “always satisfied” by showing written disclosure of assets, and annual income for “each of the preceding three years” and any significant future acquisitions or changes in income that the party “reasonably expects to realize within three years of the agreement’s execution.” Evidence that contesting spouse has knowledge of all other spouse’s assets independent of any written disclosures will satisfy requirement of disclosure. § 7.04(5) comment g.

“Circuit-breaker” protections if there is “substantial injustice”. There is a “stop gap” provision in the ALI which states that an agreement should not be enforced if it would “work a substantial injustice”. § 7.05. One of the factors listed is if there has been a change in circumstance between the time when the agreement was executed that has a substantial impact on the parties or their children, and the change or the impact was not anticipated. § 7.05(2)(c)

A court will take into account whether the purpose of the agreement was to benefit or protect the interests of third parties (such as the children from a prior relationship) and “the impact of the agreement’s enforcement upon the children of the parties.” § 7.05(3)(a), (c), (d). Other factors may include the length of the marriage, the motives of the contracting spouses, their respective bargaining positions, the circumstances giving rise to the marital agreement, the degree of the pressure, if any, experienced by the contesting spouse, and other circumstances the judge finds relevant.

Finally, a term in a marital agreement may not be enforceable if it would require or forbid a court to evaluate marital conduct in allocating marital property, except as incorporated by state law.

Learn more about postnuptial agreements.