Tuesday, February 23, 2010

A Brief History of Prenuptial and Postnuptial Agreements - Indiana and Elsewhere

Thank Google Scholar for this post. While doing some research I ran across Lifting the Veil of Ignorance: Personalizing the Marriage Contract, 73 Ind. L.J. 453 (1998). I suggest anyone having any opinions on our current family law system to give this a careful reading - some history, some statistics that might not be commonly known. Also, the writers avoid the usual dry as dust, insomnia inducing writing of most academics.

In all of that, the writers give a history of marital agreements and why few entered into prenuptial or post-nuptial agreements (on the way to proposing some interestingly unique ideas for reform).

Back in 1996, the Indiana Supreme Court handed down Rider v. Rider, 669 NE 2d 160, that gave this history of prenuptial agreements:

Antenuptial agreements are legal contracts which are entered into prior to marriage which attempt to settle the interest each spouse has in property of the other, both during the marriage and upon its termination. This court has long held antenuptial agreements to be valid contracts, as long as they are entered into freely and without fraud, duress, or misrepresentation, and are not unconscionable. See Mallow v. Eastes, 179 Ind. 267, 100 N.E. 836 (1913); Kennedy v. Kennedy, 150 Ind. 636, 50 N.E. 756 (1898); and McNutt, v. McNutt, 116 Ind. 545, 19 N.E. 115 (1888). These early cases drew a distinction between agreements which took effect upon the death of a spouse as opposed to those which took effect upon dissolution of the marriage. Those antenuptial agreements which involved application upon the death of a spouse were "favored by the law as promoting domestic happiness and adjusting property questions which would otherwise often be the source of fruitful litigation." Buffington v. Buffington, 151 Ind. 200, 51 N.E. 328, 329 (1898). However, the courts took a rather dim view of antenuptial agreements which limited the legal obligation of support upon dissolution of the marriage. Watson v. Watson, 37 Ind.App. 548, 77 N.E. 355 (1906).

Since these turn of the century cases, the number of subsequent marriages in our society has increased substantially. See In re Marriage of Boren, 475 N.E.2d 690, 693 (Ind. 1985). Individuals, especially those who have children from previous marriages, may wish to protect their property interests upon entering into a marriage. Id. at 694. In Boren, we concluded that policy reasons no longer compel us to find antenuptial agreements which take effect upon divorce to be void per se. Further, we held that the same traditional contract tests which apply to antenuptial agreements which take effect upon the death of a spouse also apply to antenuptial agreements pertaining to the dissolution of marriage. Id. Boren was the last time we addressed the issue of the validity of antenuptial agreements.

Since Boren, our Court of Appeals has had several occasions to address this issue. The leading case is Justus v. Justus, 581 N.E.2d 1265 (Ind.Ct.App.1991), trans. denied. In Justus, the Court of Appeals was presented with a situation where the couple entered into an antenuptial agreement freely, without fraud, duress, or misrepresentation. However, during the course of the marriage there was a change in circumstances, and the trial court would not enforce the agreement in its entirety. The Court of Appeals noted that

[a]s a general rule, a contract is unconscionable if there was a gross disparity in bargaining power which led the party with the lesser bargaining power to sign a contract unwillingly or unaware of its terms and the contract is one that no sensible person, not under delusion, duress or distress would accept. The doctrine of unconscionability necessarily looks to the time of execution.

Id. at 1272 (citations omitted).

However, the analysis did not stop there. The Justus court continued with a discussion of cases from other jurisdictions, focusing primarily on Newman v. Newman, 653 P.2d 728 (Colo.1982). In Newman, the Supreme Court of Colorado applied the above general contract analysis for property division, but would not do so for maintenance. For the latter, the Newman court found that such provisions may become voidable as unconscionable due to circumstances existing at the time of dissolution. 653 P.2d at 734-35.

163 In Justus, the Court of Appeals noted that we, in Boren, had cited approvingly to Newman. Further, the Justus court found that where enforcement of an antenuptial agreement would leave a spouse in the position where he would be unable to support himself, the state's interest in not having the spouse become a public charge outweighs the parties' freedom to contract. Justus, 581 N.E.2d at 1273. Therefore, the Justus court agreed that a court may look to circumstances at the time of dissolution to determine unconscionability of an antenuptial agreement.[2]

We are asked in this particular case to examine an antenuptial agreement which was not unconscionable when made, but due to a 164 change in circumstances would operate to create a financial hardship for one spouse. We note that in 1995 Indiana joined the growing list of states which have adopted the UPAA. Indiana's version of the UPAA reads in relevant part:
If a provision of a premarital agreement modifies or eliminates spousal maintenance and the modification or elimination causes one (1) party to the agreement extreme hardship under circumstances not reasonably foreseeable at the time of the execution of the agreement, a court, notwithstanding the terms of the agreement, may require the other party to provide spousal maintenance to the extent necessary to avoid extreme hardship.

I.C. § 31-7-2.5-8(b). The Indiana statute did not take effect until July 1, 1995, and is therefore not applicable to this case. Still, the adoption of the UPAA provides useful guidance regarding the question of unconscionability, and supports the trend of applying traditional contract law unless the agreement is unconscionable at time of dissolution.

And there we have a brief history of prenuptial law in Indiana.

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