Reconciliation contracts, also known as post-nuptial agreements, are entered into by married or civil partnered couples who are contemplating divorce in the medium to long term but want to stay in the marriage for the time being, or who want to give their relationship another go following a period of separation. The contracts can be useful for outlining the financial parameters which both parties agree should be adhered to during the relationship and the financial settlement if they end up separating or divorcing. This can provide clarity on financial issues so that the parties can concentrate on the relationship and raising any children rather than worrying about what might happen if things do not work out and they end up divorcing. Parties can, for example, record that any future inheritance either of them receives will be ring fenced on divorce i.e. kept separate from the matrimonial assets that may be shared on divorce/dissolution. They can state who will pay for which items of family expenditure during the relationship. They can also contain an agreement on a level of housing or maintenance for the financially weaker spouse if there is a divorce in the future.
The content of reconciliation contracts is not automatically legally binding on divorce/dissolution. A court may however make a final financial order in the terms of the contract where it has been freely entered into by each party with a full appreciation of its implications unless, in the circumstances, it would not be fair to hold the parties to the agreement.
For a reconciliation contract to be considered fair, a court will consider whether,at the time it was entered into:
1. Both parties obtained independent legal advice;
2. There was full financial disclosure;
3. Each party's needs can be met by the agreement;
4. There was undue influence or duress;
5. There was any fraud or misrepresentation by a party in relation to the contract; and
6. Technical legal contractual requirements were followed.
Reconciliation contracts are a good idea if parties want to anticipate what might happen if there is a separation or divorce in the future. They can agree matters now, which hopefully will avoid a protracted dispute with the accompanying high legal fees at the time of divorce, which will inevitably be a stressful time anyway.
