Prenuptial Agreement (Prenup)
Prenuptial Agreement (Prenup)
What is a Prenuptial Agreement?
A prenuptial agreement, commonly known as a "prenup" or "premarital agreement," is a legally binding contract between a couples entered into before marriage. This document outlines the distribution of assets, liabilities, and issues related to child custody in the event of divorce, separation, or the death of a spouse. Its primary purpose is to establish clear expectations and protect the financial interests of both parties, particularly when significant assets or businesses are involved. Prenups can cover aspects like property division, spousal support, and handling of marital debts. It's essential to recognize that laws governing prenuptial agreements vary by jurisdiction, and legal counsel is recommended for both parties to ensure adequate protection of their rights and interests.
Why prenup agreement?
In light of the increasing divorce rates, prenuptial agreements are becoming more common and practical in India. Despite social stigma, especially within traditional & wealthy families, prenups serve as crucial legal safeguards. They help navigate complex divorce battles, protecting parties from financial uncertainties and exorbitant settlements. Prenuptial agreements clarify property division, providing a sense of security amidst emotional trauma. It's crucial to approach prenups objectively, considering factors like biased legislation, potential misuse of domestic violence laws, and the lack of arithmetical guidelines for alimony in India. By establishing financial expectations in advance, prenups can prevent undue legal complexities and save couples from expensive advocate fees.
What are the essential clauses of Prenup?
1.?????? Separate Property-?This clause refers to the property that is individually owned by the couple. In matters of divorce or death, it will remain separate only.
2.?????? Shared Property– This clause covers the property which is jointly owned by the couple. It may be a house, car or anything that they have brought together. This clause addresses what needs to be done to the shared property when the couple decides to split.
3.?????? Alimony & Spousal Support -?This is the most important clause of the prenup and states the amount of alimony that will be given to one spouse by another after considering all the parameters. It takes into consideration whether both parties are earning or not earning. It also takes into account if one party, who is not earning, starts to earn eventually.
4.?????? Earning during the marriage-?The earnings done by each party during the marriage is considered as the separate property of that spouse. As per the mutual understanding of both the parties, they can decide how they would like to deal with during the marriage.
5.?????? Business Interests: Detail the treatment of business interests, including ownership, control, and valuation, in the event of divorce or separation
6.?????? Financial Responsibilities: Specify how financial responsibilities during the marriage, such as household expenses and joint accounts, will be managed.
7.?????? Estate Planning: Address the disposition of assets in the event of the death of one spouse, including provisions for inheritance and wills.
8.?????? Personal Rights and Obligations: Outline any other personal rights and obligations of each spouse, including matters related to education, religion, and other personal preferences.
9.?????? Dispute Resolution: Include provisions for how disputes related to the agreement will be resolved, such as through mediation or arbitration.
10.?? Infidelity clause: An infidelity clause in a prenuptial agreement is a provision that addresses the consequences or terms related to infidelity, typically within the context of a marriage. These clauses are not universally enforceable and can vary widely depending on jurisdiction and legal principles. It's important to note that family law is often subject to state or country-specific regulations, and the enforceability of clause related to behavior within a marriage, such as infidelity clauses, may be limited
11.?? Sunset Clause: Specify conditions under which the prenuptial agreement may be terminated, such as after a certain number of years of marriage.
12.?? Custody of Children– This clause settles to whom does the?custody of children?go after the divorce. The couple can opt for joint custody or sole custody. Under joint custody, both parents have legal custody of the child, but only one of them has physical custody of the child. However, in sole custody, only one of them has both the physical and legal custody of the child.
Precautions for a Prenuptial Agreement:
a) Include a clause confirming that both parties have voluntarily and mutually agreed to the terms without any force, undue influence, or threat. Ensure that they have carefully understood all clauses in the agreement.
b) Ensure the fairness of the agreement, and it should be duly acknowledged by both parties to demonstrate their consent and understanding.
c) Insert a severability clause, allowing the rest of the agreement to remain valid even if one clause is invalidated. This ensures the overall enforceability of the agreement.
d) Include a comprehensive list of assets and liabilities of each spouse. Transparency is crucial, and hiding assets can undermine the purpose of having a peaceful prenuptial agreement.
e) Integrate a sunset clause to specify the expiration of the prenup and an 'infidelity clause' that outlines conditions related to cheating, allowing for additions or amendments based on such discoveries.
f) While wedded bliss ideally resolves legal issues, adding a prenuptial agreement can provide additional support, especially in marriages involving individuals from different religions, culture or financial background. Consider including a prenup to avoid post-marital trauma.
g) Reiterate the importance of fairness and acknowledgment by both parties within the agreement.
h) Duplicate the severability clause to emphasize its significance in preserving the validity of the agreement despite the invalidation of specific clauses.
It is imperative for both parties to seek independent legal advice during the drafting or reviewing of a prenuptial agreement. This ensures the protection of their interests and compliance with jurisdictional laws. Enforceability of certain clauses may vary, making consultation with legal professionals essential for a comprehensive understanding of the agreement's implications and limitations.
Validity of Prenuptial Agreement in India
The Indian legal system, particularly as regards matrimonial laws, does not yet recognise prenups as legal agreements. At present in India, there is no categorical (documented) law governing prenups.
They are 4 views about prenups in India-
1)????? They are governed by the law of contracts and not matrimonial laws. They require the same condition as for any other contract under Section- 10 of the Indian Contracts Act, 1872.
2)????? The other view is that prenups are against public policy and hence void under Section- 23 of the Indian Contract Act.
3)????? Some consider prenups as only a memorandum of understanding and are not binding on the parties.
4)????? Prenups can be considered binding if the marriage is solemnised under the Special Marriage Act, provided it is submitted along with other documents to the registrar.
In the ongoing discourse surrounding the legal validity of prenuptial agreements (prenups), it is crucial to recognize the significance of their emotional feasibility:
?? Amidst the debate over the legal standing of prenups, it is essential to emphasize the emotional feasibility that such agreements offer. While their legal recognition remains a subject of discussion, the emotional aspects cannot be overlooked.
?? Prenuptial agreements are sometimes perceived as a manifestation of mistrust or a lack of commitment among individuals. However, it is important to note that, despite this perception, prenups serve a valuable role in addressing financial and property-related matters within marriages.
?? Despite the fact that prenups cannot be legally enforced in India, as they primarily signify the intent of the parties involved, their influence is not entirely disregarded by the courts. When delivering judgments, courts may take into consideration the directions provided by prenuptial agreements, acknowledging their role in expressing the parties' expectations and intentions.
?? In essence, while the legal status of prenuptial agreements remains a topic of debate, their emotional and practical utility in navigating financial aspects of a marriage should be duly acknowledged. Prenuptial agreements offer a means of addressing sensitive issues, even if their legal enforceability is limited, contributing to clarity and understanding between the parties involved.
Enter Pre-nuptial agreement in Goa?
Recognition of pre-nuptial arrangements by Portuguese Civil Code??
The Portuguese Civil Code expressly permits spouses to engage in contracts and agreements concerning their assets and ownership before the solemnization of marriage. Article 1096 of the Code allows spouses to freely stipulate terms regarding their assets before marriage. However, under Article 1098, in the absence of a declaration, it is presumed that all assets become common to both spouses.
To prevent the misuse of prenuptial agreements, certain provisions are in place. Any contract that alters the legal order of succession of legal heirs or paternal and conjugal rights and obligations, as established by law, is considered null and void.
Article 1104 of the code specifies that a wife cannot deprive the husband, through a prenuptial contract, from administering the couple's assets. However, she may reserve the right to receive part of the income from her assets for personal expenses, not exceeding one-third of the net income. Furthermore, Article 1105 stipulates that no revocation or alteration of a prenuptial contract through a new contract is permissible after the solemnization of the marriage.
In accordance with the legal principles followed in Goa, marriage is regarded as a form of contract. The nature of the contract entered into before marriage governs the assets of the couple, providing a framework for the recognition and enforcement of prenuptial arrangements. The assets of couples are governed by the type of contract they enter into before marriage. ?Four types of contracts for administration of assets are -
1.?????? Law of Community Property (Article 1099): When there is no express contract between spouses, this provision applies. Under this arrangement, both parties acquire joint ownership of all assets, including inheritance-related assets. The spouse's approval is crucial for disposal or encumbrance. In the event of separation, the woman is entitled to receive half of the husband's income.
2.?????? Absolute Separation of Property: In this system, partners maintain ownership of their properties independently, and there is no communion of assets. Each spouse retains exclusive rights to their respective assets.
3.?????? Separation of Assets Prior to Marriage: Total separation of assets occurs before marriage, with a subsequent communion of assets and properties acquired after marriage. This form allows for a clear distinction between pre-marital and marital assets.
4.?????? Dotal Regime: In this regime, the share of the bride in her father's estate is transferred to the husband. However, the husband is obligated to return the property in the event of the dissolution of the marriage. This arrangement involves the transfer of a woman's share in her family's estate to her husband upon marriage, with a provision for return if the marriage ends.
These 4 types of contracts for the administration of assets provide varying frameworks for the ownership, disposal, and distribution of assets between spouses, allowing flexibility and clarity in managing their financial affairs.
Pre-nuptial agreements as per Hindu Law
In Hindu marriages, viewed as sacraments, any agreement promoting separation or conflicting with personal laws has traditionally been deemed invalid. Despite a body of Indian case law initially opposing the validity of prenuptial agreements in Hindu marriages, there has been a gradual evolution in their interpretation and acceptance by the courts.
Historically, decisions like Tekait Man Mohini Jemadi v. Basanta Kumar Singh and Krishna Aiyar v. Balammal declared prenuptial agreements void, citing their opposition to public policy. However, in the case of Pran Mohan Das v. Hari Mohan Das, the Calcutta High Court took a different stance, deeming a prenuptial agreement valid. The court invoked the principle of "part-performance of a contract," estopping the plaintiff from recovering the property. Importantly, the court held that the agreement, not being a marriage brokerage contract, did not oppose public policy.
In another instance, although the judgment in Sandhya Chatterjee v. Salil Chandra Chatterjee concerned a post-nuptial agreement, the Calcutta High Court upheld an agreement for separation and maintenance payment, asserting that it did not contravene public policy.
A comprehensive review of these case laws reveals a shift over time in the courts' perspectives, demonstrating a more liberal view towards the understanding of parties expressed through agreements. This evolving understanding can be categorized into two aspects: first, by enforcing prenuptial agreement terms alongside other legal principles, and second, by creating exceptions within the broader framework of judicial precedents that initially deemed prenuptial agreements invalid due to their perceived conflict with public policy. The evolving dynamics and changing judicial perspectives suggest a reconsideration of the validity of prenuptial agreements within the context of Hindu law.
Pre-nuptial agreements in Muslim marriages
Recognizing marriage as a civil contract for Muslims, an examination of case laws pertaining to the interpretation of prenuptial agreements in Indian courts reveals intriguing insights. Several interesting findings emerge from the study of trends in this area.
In certain cases, such as Khatun Bibi v. Rajjab, Ahmad Kasim Molla v. Khatun Bibi (‘Kasim Molla'), and Bai Fatma v. Ali Mahomed Aiyab, the courts have observed that agreements promoting future separation between spouses are considered void due to their conflict with public policy.
Contrastingly, in a series of decisions including Muhammad Muin-Ud-Din v. Musammat Jamal Fatima (‘Muin-Ud-Din'), Saifuddin Sekh v. Soneka Bibi, and others, the courts have upheld the validity of prenuptial agreements in cases of dissension between spouses.
These diverse outcomes in legal decisions underline the nuanced approach courts take when dealing with prenuptial agreements in Muslim marriages. While some cases emphasize the voidness of agreements promoting future separation, others acknowledge the validity of such agreements when addressing discord between spouses. The evolving nature of case laws reflects the complexity and diversity of perspectives within the legal framework governing prenuptial agreements in Muslim marriages.
Summary:
·???????? A perusal of these cases indicates an orientation of Indian courts towards giving effect to prenuptial agreements entered into by couples. Initial invalidation of such agreements was based partly on the existing stance on public policy promulgated by the British courts. The initial understanding was based on the idea that entering into an agreement for future indicates an intent to separate in the future which was against public policy. However, later cases appear to have adopted a more liberal and understanding approach.
·???????? Portuguese Civil Code's recognition of pre-nuptial agreements in comparison to personal laws applicable to the rest of India provide an exception to the norm. In the wake of discussions regarding Uniform Civil Code, Portuguese Civil Code's uniform approach to distribution of assets in a marriage serves as a good reference. The position of law under Portuguese Civil Code has been appreciated widely, with the Supreme Court in the case of?Damodar Ramnath Alve v. Shri Gokuldas Ramnath Alve?observing that the Portuguese Civil Code has strengthened the basic unit of the society and the family by safeguarding the interests of the children and of widows.
Conclusions:
A. While most individuals don't contemplate divorce when entering into marriage, celebrities like the Chopras, Kapoors, and Shahs often seek control over their finances in the event of an unexpected divorce. Discussing a prenuptial agreement becomes crucial for them, especially when a non-celebrity is introduced into a wealthy family through a romantic relationship.
B. In India, prenuptial agreements are not recognized under marriage laws, which do not view marriage as a contractual relationship. Despite lacking social acceptance, they are governed by the Indian Contract Act, holding the same legal standing as any other contract—be it oral or written.
C. Indian courts acknowledge prenuptial agreements if both parties voluntarily and mutually agree to the terms without undue influence, force, or threat. The agreement must be fair, explicitly outlining the division of property, personal possessions, and financial assets, and should be certified by separate lawyers for each party.
D. One significant advantage of a prenuptial agreement is that it prompts couples to have a financial discussion before marriage. It efficiently addresses issues such as debt protection, family business division, disputes over shared and separate assets, and arrangements for children's custody post-divorce, essentially determining the asset distribution in the event of a divorce.
A.????? E. The success of a prenuptial agreement hinges on the willingness of both parties to participate and their honesty about individual assets and liabilities. Importantly, the agreement must be established before the wedding takes place to be legally effective.?
CA Harshad Shah, Mumbai [email protected]