9.2: Marital Contracts

According to a 2022 Harris Poll survey, around 15% of married couples have a prenuptial agreement, a significant increase from just 3% in 2010. Due to cultural shifts, prenuptial and other marital contracts are no longer just for the rich and famous. There are four types of contracts that impact domestic relationships: Prenuptial agreements, postnuptial agreements, cohabitation agreements, and separation agreements.

Definition: Domestic Relations Contracts

Prenuptial agreements: A contract between two unmarried persons who intend to marry that is effective upon marriage. It covers financial and related matters during the marriage and upon termination of the marriage by separation, annulment, divorce, or death.

Postnuptial agreements: A contract between two married persons who intend to remain married that is effective immediately. It covers financial and related matters during the marriage and upon termination of the marriage by separation, annulment, divorce, or death.

Cohabitation agreements: A contract between two unmarried persons who intend to remain unmarried indefinitely that is effective immediately. It covers financial and related matters while they live together and upon termination of the cohabitation by separation or death.

Separation agreements: An agreement between two married persons who have separated or who intend to separate. It covers financial and related matters after the termination of the marriage.

In this chapter, we’ll explore three of the types of contracts that impact domestic relationships: Prenuptial agreements, postnuptial agreements, and cohabitation agreements. Separation agreements are covered in a later chapter.

Basic Introduction to Contracts

Contracts are legally enforceable agreements between persons. Like any contract, contracts impacting domestic relationships must meet certain requirements to be valid. These elements (or requirements) are mutual agreement, consideration, capacity, and legality.

• Mutual agreement is defined in the law as a “meeting of the minds” and requires that the parties to the contract agree on the contract’s essential terms, conditions, and obligations. In business-based contracts, mutual agreement is demonstrated by one party making an offer (a promise to do or refrain from doing a specific act) and another party’s acceptance (an agreement to the terms of the offer). The agreement must also be voluntary: entered into by both parties freely and without duress (unlawful use of force, threats, or pressure) or undue influence (taking advantage of a powerful or special relationship).
• Consideration is something of value that is exchanged between the parties to a contract. Consideration can be money, action, forbearance (not performing an act), or promises relating to any of those things.
• Capacity is the legal ability or power to do something, such as enter into a relationship or contract. Contractual capacity typically has two components: mental competence and minimum age. Mental competence refers to a person’s ability to understand the nature of the relationship or contract, which can be impacted by mental health conditions, alcohol, or drugs. The minimum age for contracts is determined by State law and is typically 18 years of age.
• Legality prohibits parties from agreeing to contractual terms that violate federal or state laws. For example, a contract in which one person agrees to pay another person to kill a third person would violate both federal and state criminal laws prohibiting homicide.

Any contract that does not meet all four of these requirements is invalid and cannot be enforced by either party. A determination that the contract is valid, however, does not guarantee its enforceability. You may recall learning in a previous legal studies class that certain types of documents must be in writing to be enforceable pursuant to the statute of frauds. One memory trick for the types of documents is MYLEGS: Marital contracts; contracts in effect for at least one Year; transactions involving Land; transactions involving an Executor (or an Estate); transactions involving Goods worth more than $500; and transactions involving a Surety. Trusts involve an Estate, and so they are required to be in writing. Thus, according to the Statute of Frauds, contracts impacting domestic relationships must be in writing and signed by both parties to be enforceable.

Special Considerations for Marital Contracts

Due to the emotional and financial nature of the marital relationship, special rules and procedures uniquely apply to marital contracts to ensure the voluntariness and fairness of these contracts. A marital contract should specifically address how these considerations were addressed within its written terms.

Financial Disclosure

Wisconsin requires a full and complete disclosure of assets, income, debts, liabilities, and other financial information between the parties prior to signing a marital contract. Typically, this involves written documentation that may be accompanied by permission to meet with the other party’s financial advisors. The right to full financial disclosure can be waived by either or both parties; if a party decides to waive this right, there should be a written, signed waiver. This is much more of an issue in prenuptial contracts than in postnuptial contracts.

Unconscionability and Fairness

Any contract that is shockingly one-sided, unfair, or unjust is unconscionable and cannot be enforced.

Definition: Unconscionable contract

Unconscionable contract: Any contract that is shockingly one-sided, unfair, or unjust toward one party.

In marital contracts, there are two kinds of fairness required:

1. Procedural fairness. The focus here is on the circumstances existing prior to and at the time the agreement was signed. The contract must have been voluntarily and intelligently signed. Procedural fairness asks the following questions:
   • Was there complete and accurate financial disclosure?
   • Did other circumstances provide each party the reasonable opportunity to acquire complete and accurate knowledge of the other party's finances? For example, if the parties lived together and shared income or property for a period of time that might be enough opportunity to acquire knowledge. Similarly, if one party worked as a bookkeeper in the other party’s business, that might be enough opportunity to acquire knowledge.
   • Did each party have sufficient time to read, study, and understand the terms of the agreement?
   • Did each party have sufficient time and opportunity to seek advice from independent professionals (attorneys, financial advisors, etc.) prior to signing the agreement?
   • Was there any undue pressure on the party to sign the agreement? For example, financial, physical, mental, emotional, or other threats; unequal bargaining power (due to different education or business backgrounds, age, language barrier, “take it or leave it” or absence of meaningful choice); severe time constraints; or other high-pressure circumstances. Note: a threat to call off the engagement/marriage is typically not enough “pressure” to establish involuntariness. The same is true for pregnancy alone (unless there are other aggravating factors)
2. Substantive fairness. The focus here is on the actual terms of the agreement and their impact on each party. Substantive fairness asks the following questions:
   • Are the terms equitable to both parties, mutually favorable, and not unduly one-sided?
   • Are the terms reasonable toward both parties, particularly with respect to how income, assets, debts, and liabilities would be treated upon termination of the marriage?

Substantive Fairness and the “Second Glance Doctrine”

With most contracts, the courts are only concerned about the circumstances present just before and at the time the contract is signed (the first glance). With marital contracts, however, courts are also concerned about the circumstances existing at the time a party wishes to enforce the contract (the second glance). Under the Second Glance Doctrine, the marital contract will not be enforced if a significant and unexpected change in the parties’ circumstances after the contract was signed would result in “substantial injustice” such as spousal impoverishment or other circumstances making enforcement unduly harsh.

Legality

Again, due to the unique nature of marital relationships and the State’s interest in governing marital relationships, there are certain types of clauses that, if contained in a marital contract, likely would not be legally enforceable:

• Agreement that one or both parties would not be required to pay child support in the event of an annulment or divorce,
• Agreements regarding child custody or physical placement of children born or adopted into the marriage in the event of an annulment or divorce
• Agreements that no children will be born into the marriage; or, that no birth control will ever be used by the parties during the marriage (violates constitutional protections regarding reproduction)
• Agreements relating to the nature and/or frequency of sexual relations (in most states)
• Agreements that go against a State’s “no-fault divorce” laws (for example, a liquidated damages clause requiring payment of $50,000 if a spouse is sexually unfaithful)

Guidelines for Drafting Marital Contracts

Most law offices have templates they use for drafting marital contracts; the paralegal’s primary job is accurately completing the templates with the client’s information and facilitating the signing of the agreement. The following are guidelines for steps to take at each point in the process:

Preliminary preparation

• Double-check the accuracy and correct spelling for all names, addresses, and other contact information, and relationships of each individual who will be referenced in the contract
• Confirm both parties’ ages, level of education, business experience, etc., and the amount of current income from all sources
• Obtain a list of the client’s financial or other professional advisors with whom the client has consulted regarding the client’s assets, debts, and property
• Determine whether the other party to the agreement has ever been treated for or is currently receiving treatment for a mental health condition that could impact the other party’s ability to understand and voluntarily sign the agreement
• Confirm whether the other party to the agreement is represented by counsel
• Inform the client that the other party to the agreement will need to be given ample time to consult with independent professionals regarding the agreement after it is drafted and presented to the other party (typically several weeks)

Documentation for the client’s file

• Prepare a detailed list of the client’s personal and business assets, with the current exact or approximate fair market value of each. Include real property, vehicles, jewelry, household furniture, financial investments (checking/savings accounts, certificates of deposit, stocks, bonds, mutual funds, annuities, cash), retirement accounts (IRA, 401k, pension, etc.), other personal property, and intellectual property. Indicate whether each item is individually or jointly owned. Include account numbers and legal descriptions.
• Prepare a detailed list of the client’s current personal and business debts, liabilities, and obligations
• Prepare a detailed list of the client’s known future assets that the client expects to acquire during the marriage, with the exact or approximate fair market value of each. Include future employment contracts, purchase options, or other anticipated purchases.
• Obtain copies of the client’s documentation regarding the above items, such as bills, statements, deeds, titles, contracts, purchase agreements, etc.
• Obtain copies of the client’s recent personal and business tax returns
• Obtain a list from the other party of the other party’s current and known future personal and business assets, debts, and liabilities as described above

Documentation to provide to the other party to the agreement

• Draft correspondence (to be signed by your supervising attorney) ensuring the other party understands that your supervising attorney does not represent the other party and cannot give the other party legal or financial advice, and encouraging the other party to retain independent legal counsel
• Provide a list of the client’s current and known future personal and business assets, debts, and liabilities as described above. Remove account numbers, legal descriptions, or confidential information from the list. Keep only enough information to adequately identify each item and its value (for example, 2003 Polaris Pro X 800 snowmobile, with an approximate value of $4,000)
• Provide a separate list of personal and business assets, debts, and liabilities jointly owned by the client and the other party

Provisions to include in a Wisconsin agreement

• Statement regarding the date on which the parties intend to marry (or date of the marriage, for postnuptial agreements)
• General acknowledgement that both parties own separate property, that both parties acknowledge is “Individual Property”, and that they played no role in accumulating the other’s Individual Property
• Statement of domicile in Wisconsin and election of Wisconsin law as the choice of law to be applied to the agreement regardless of either party’s future domicile
• Statements that each party understands the impact of the agreement on present and future assets, and their rights related to those assets
• Statement that the mutual promises contained in the agreement are the sole consideration forming the basis of the agreement
• Statement that full and complete disclosure of assets and liabilities has been made and/or waived by both parties
• Separate list of currently owned Individual Property of each party, with only enough information to adequately identify each item and its value
• Separate list of anticipated future owned Individual Property of each party, with only enough information to adequately identify each item and its value
• Statements regarding each party’s rights to their Individual Property and its management and control
• Separate list of currently owed individual debts and liabilities of each party, with only enough information to adequately identify each item and its value
• Definition of “Earnings” and what is included or excluded as Marital Property
• Separate list of property currently jointly owned by the parties (if any); definition of what shall be considered Marital Property that is accumulated during the marriage
• Description of how the parties intend to pay household and other expenses during the marriage
• Provisions regarding property disposition, division, or distribution upon the death of either party, and in the event of divorce, annulment or legal separation
• Provisions regarding spousal support in the event of divorce, annulment, or legal separation
• Necessary severability clauses, as determined by the attorney. A severability clause states that if any part of the agreement is later determined to be invalid, the remaining valid portions of the agreement should still be enforced.
• Statement that each party acknowledges the agreement was signed voluntarily, with no duress or undue influence
• Statement that prior to signing the agreement, each party had the opportunity to consult with the party’s own individual independent legal counsel regarding the agreement’s terms and legal impact on the party. Alternatively, that the other party chose not to hire individual independent legal counsel to review and explain the agreement.

Procedure for signing the agreement

• Confirm that each party has read the agreement, understands it, and voluntarily intends to sign it
• Confirm that each party is not currently under the influence of alcohol, drugs, or any medication that might affect the party’s mental capacity
• Witness each party signing the agreement; notarize (using proper procedure) as applicable
• Provide original agreement to the parties; retain a copy for the client’s file

Access additional information from the Madison State Counsel regarding Marital Agreements

Special Considerations for Cohabitation Contracts

In general, because cohabitating couples are not married and have no intention to marry, cohabitation contracts are treated more similarly to non-marital contracts. Marital property laws do not apply to unmarried couples in Wisconsin, and the requirements of financial disclosure and the “second glance” doctrine do not apply. As long as the contract is in writing and meets the four requirements for validity, terms of cohabitation contracts regarding the division of property between the parties upon termination of their cohabitation will most likely be enforced. As with marital contracts, provisions regarding children (child support, child custody, child placement) will not be enforced. However, as long as sexual relations are not part of the consideration (that is, are not a condition of the contract), Wisconsin courts may enforce property, debt, and income terms of cohabitation agreements. Wisconsin law also recognizes the right of cohabitating partners to recover financial contributions toward property owned by their partners.

See the following for more information about cohabitation agreements:

• Sample Cohabitation Agreement - FindLaw
• Cohabitation Contracts: What to Include and How to Write One | Nolo
• Free Cohabitation Agreement Template | PDF & Word (legaltemplates.net)
• Free Cohabitation Agreement Template | LegalZoom

Case in Point: In re the Marriage of Bonds, 24 Cal. 4th 1, 5 P.3d 815 (2000).

Synopsis

Barry Bonds was a major league baseball player in the 1980s, 1990s and early 2000s. When he married Susann (who went by the name of Sun) in 1988 he was a second-year outfielder with the Pittsburgh Pirates earning $106,000 per year. When the parties divorced in 1994, Bonds had just signed a then-record 6-year contract with the San Francisco Giants worth $43.75 million. Sun was a Swedish native who had emigrated to Canada two years before meeting Barry. She worked as a waitress and bartender; although her native language was Swedish, she spoke both French and English in her employment, education, and personal relationships when she lived in Canada. Although Sun had completed some cosmetology training, she was unemployed from the time she moved in with Barry in 1987 through the date of their divorce. In January 1988, Barry and Sun decided to marry. On February 5, 1988, Barry and Sun signed a prenuptial agreement drafted by Barry’s attorney in which both parties waived any interest in the other party’s marital earnings and acquisitions. Sun was not represented by an attorney. The day they signed the agreement Barry and Sun flew to Las Vegas where they were married the next day (February 6, 1988). Sun challenged the enforceability of the prenuptial agreement, claiming she was not represented by an attorney and lacked sufficient knowledge and understanding to enter into the contract voluntarily.

Excerpts

Following are excerpts from the opinion affirming the trial court’s determination that the prenuptial agreement was enforceable against Sun: (citations and references to other authorities within the opinion are omitted)

Barry testified that he … recalled that from the beginning of his relationship with Sun he told her that he believed his earnings and acquisitions during marriage should be his own. He informed her he would not marry without a premarital agreement, and she had no objection. He also recalled that from the beginning of the relationship, Sun agreed that their earnings and acquisitions should be separate, saying "what's mine is mine, what's yours is yours." Indeed, she informed him that this was the practice with respect to marital property in Sweden. She stated that she planned to pursue a career and wished to be financially independent.

[Sun] testified that her English language skills in 1987 and 1988 were limited. Out of pride, she did not disclose to Barry that she often did not understand him. She testified that she and Barry never discussed money or property during the relationship that preceded their marriage. She agreed that she had expressed interest in a career as a cosmetologist and had said she wished to be financially independent. She had very few assets when she took up residence with Barry, and he paid for all their needs … She testified that only at the parking lot of the law office where the agreement was to be entered into did she learn … that Barry would not marry her unless she signed a premarital agreement …. She was under the impression that Barry wished to retain separate ownership of property he owned before the marriage, and that this was the sole object of the premarital agreement. She was unaware the agreement would affect her future….

Barry [and his attorneys] testified that … at the meeting the attorneys informed Sun of her right to independent counsel. All three recalled that Sun stated she did not want her own counsel, and [Barry’s attorney] recalled explaining that he and Brown did not represent her. Additionally, all three recalled that the attorneys read the agreement to her paragraph by paragraph and explained it as they went through it, also informing her of a spouse's basic community property rights in earnings and acquisitions and that Sun would be waiving these rights. [I]t was clearly explained that Barry's income and acquisitions during the marriage would remain Barry's separate property, and … Sun stated that such arrangements were the practice in Sweden. Furthermore, Barry and the two attorneys each confirmed that Sun … asked questions during the meeting … that Sun did not exhibit any confusion, and that Sun indicated she understood the agreement. They also testified that changes were made to the agreement at Sun's behest. [Barry’s attorneys] experienced no difficulty in communicating with Sun, found her confident and happy, and had no indication that she was nervous or confused, intimidated, or pressured. No threat was uttered that unless she signed the agreement, the wedding would be cancelled, nor did they hear her express any reservations about signing the agreement.

The trial court determined that there had been no coercion. It declared that Sun had not been subjected to any threats, that she had not been forced to sign the agreement, and that she never expressed any reluctance to sign the agreement. It found that the temporal proximity of the wedding to the signing of the agreement was not coercive, because under the particular circumstances of the case, including the small number of guests and the informality of the wedding arrangements, little embarrassment would have followed from postponement of the wedding. It found that the presentation of the agreement did not come as a surprise to Sun, noting that she was aware of Barry's desire to "protect his present property and future earnings," and that she had been aware for at least a week before the parties signed the formal premarital agreement that one was planned.

With respect to the presence of independent counsel, although Sun lacked legal counsel, the trial court determined that she had a reasonable opportunity to obtain counsel. The trial court stated: "[Sun] had sufficient awareness and understanding of her right to, and need for, independent counsel. [Sun] also had an adequate and reasonable opportunity to obtain independent counsel prior to execution of the Agreement. …. On at least two occasions during the February 5, 1988, meeting, [Sun] was told that she could have separate counsel if she chose. [She] declined. [She] was capable of understanding this admonition."

With respect to the question of inequality of bargaining power, the trial court determined that Sun was intelligent and, evidently not crediting her claim that limited English made her unable to understand the import of the agreement or the explanations offered by Barry's counsel, found that she was capable of understanding the agreement and the explanations proffered by Barry's attorneys. There is ample evidence to support the trial court's determination regarding Sun's English-language skills, in view of the circumstances that for two years prior to marriage she had undertaken employment and education in a trade that required such skills, and before meeting Barry had maintained close personal relationships with persons speaking only English. … we observe that the evidence supports the inference that Sun was intrepid rather than a person whose will is easily overborne. She emigrated from her homeland at a young age, found employment and friends in a new country using two languages other than her native tongue, and in two years moved to yet another country, expressing the desire to take up a career and declaring to Barry that she "didn't want his money." These circumstances support the inference that any inequality in bargaining power—arising primarily from the absence of independent counsel who could have advised Sun not to sign the agreement or urged Barry to abandon the idea of keeping his earnings separate—was not coercive.

Think About It ...

Based on what you’ve learned:

1. A client brings a proposed prenuptial contract to the office and is wondering whether it would be a good idea to sign it.
   • What kinds of questions would you ask the client about the client’s background and current and future circumstances?
   • What kinds of questions would you ask the client about the other party’s background and current and future circumstances?
   • In addition to the proposed contract, what kinds of documentation should the client bring for the supervising attorney’s review?
2. A client is seeking a divorce and has a signed prenuptial contract that the soon-to-be ex-spouse is seeking to enforce.
   • What kinds of questions would you ask the client about the client’s background, and the client’s past, current, and future circumstances?
   • What kinds of questions would you ask the client about the other party?
   • How would you investigate questions of voluntariness and fairness?
   • In addition to the proposed contract, what kinds of documentation should the client bring for the supervising attorney’s review?
   • Are there any other persons whom you’d like to speak with regarding the client’s situation?

Paralegal Roles

Whether a client comes to the law office requesting a marital contract, asking about the advisability of signing a proposed marital contract, or seeking to enforce a marital contract, the paralegal’s role is to support the supervising attorney in providing legal services and acting as a liaison between the client and the supervising attorney. Typical tasks include interviewing the client, requesting documents and other information from the client, conducting factual investigation and/or legal research, drafting documents as directed by the supervising attorney, and facilitating the signing of documents.