Pre-nuptial agreements allow people to ringfence part of their wealth at the outset of a marriage. They are enforceable in many countries but they have never been binding in England and Wales
However, the Supreme Court has ruled that a pre-nuptial agreement is binding in the case of a German paper company heiress.
Katrin Radmacher's ex-husband Nicolas Granatino went to the Supreme Court after appeal judges slashed his divorce settlement from more than £5m to £1m.
The Supreme Court said it agreed that in the right case pre nuptial agreements can have decisive or compelling weight.
The case was seen by lawyers as a test of whether “pre-nup” agreements were applicable in law in England and Wales.
The judges deciding the case said "it will be natural to infer that parties entering into agreements will intend that effect be given to them".
In effect, therefore, these agreements are now binding unless they are unfair. So if the parties enter into a "pre-nup" freely, are fully informed of all the relevant financial and other information, and the implications of the agreement, then the courts will generally uphold the terms of that agreement.
The president of the Supreme Court made it clear, though, that courts would still have the discretion to waive or vary any pre nuptial (or post nuptial) agreement especially in cases where the terms of such agreement would have an adverse effect on any children of the family.
The ruling has been hailed as a judgement for a modern society, but there are some who believe it will significantly damage the financially weaker party in divorce. If that party, normally the wife, is held to the terms of a pre-nup she may be deprived of a considerable chunk of the couple's wealth.
The Law Commission is due to report in 2012 on whether a change in the law should be made to ensure pre-nuptial agreements are fully enforceable.
If you, or anyone you know, needs advice on any pre nuptial agreement then please give Lyn a call on 01733 888841.
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